Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — SOCIAL SECURITY

The Secretary of State was asked—

Oral Answers to Questions — Retirement Pensioners

Sir Teddy Taylor: If she will make a statement or the total number of retirement pensioners (a) at the latest available date, (b) five and (c) 10 years ago. [34043]

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): There were 10.7 million retirement pensioners at 30 September 1997 Five years ago there were 10.3 million pensioners and 10 years ago there were 9.9 million pensioners.

Sir Teddy Taylor: Retirement pensioners are now a substantial proportion of the community. Is the Minister aware of the genuine concern and alarm among pensioners about reports of a fundamental review that might lead to the retirement pension being means-tested? Can the Minister give a clear and categorical statement

that that is untrue? Can he confirm that he and his fellow Ministers will resign if there is any such Government proposal?

Mr. Denham: I am pleased to make it clear to the House that we have a manifesto commitment to retain the basic state pension as the foundation for retirement provision and to uprate it at least in line with prices. We have more than honoured that commitment by taking the unprecedented step of issuing winter fuel payments to all pensioners who have fuel bills this winter.

Mr. Duncan Smith: More than a week and a half ago the Minister attended a dinner held by the Association of Consulting Actuaries at which the chairman told the Government that
they must stop loosening the foundations on which the hitherto robust system of Occupational Schemes is built.
The chairman also said that the ramifications of the Government's first Budget on coming to power
were clearly not thought through at the time of the Mini-Budget.
The Minister was sitting next to the chairman. Did he agree with those sentiments?

Mr. Denham: At that enjoyable dinner, which the hon. Gentleman also attended, I was able to make it clear that the Government wish to support and strengthen the framework for occupational pensions. During the pensions review we are looking at the regulatory system for occupational pensions and how the best occupational schemes can be marked by a quality pensions award. We are also examining ways to improve pension scheme members' understanding of their schemes and their entitlements.

Sir Teddy Taylor: On a point of order, Madam Speaker. In view of the Minister's unsatisfactory and ambiguous reply, I give notice that I intend to raise this matter on the Adjournment

Oral Answers to Questions — Violence Against Women

Ms Squire: If she will make a statement on the Government's plans to tackle violence against women. [340441]

The Parliamentary Under-Secretary of State for Social Security (Ms Joan Ruddock): The Ministers for Women have been working with Ministers from across Government Departments on this issue. A national strategy for England and Wales on tackling all forms of violence against women will be published in the autumn. The Scottish Office is producing a strategy on tackling all forms of violence against women in Scotland, along the same lines as the national strategy.

Ms Squire: I welcome my hon. Friend's statement about a national strategy. Is she aware that the demand for refuge accommodation by victims of domestic violence throughout England, Wales and Scotland has increased? For example, last year, in Dunfermline, 246 women had to be turned away, and throughout Scotland more than 4,000 women and 6,000 children were turned away because of a lack of suitable accommodation. Does she agree that there is no excuse for violent criminal behaviour that causes women and children to flee their homes and that it is vital that combating domestic violence remains a Government priority?

Ms Ruddock: One of the prerequisites of any effective national strategy is access to accurate statistics. In our early discussions between Departments, we found many gaps. My hon. Friend will wish to know that in Scotland a research survey was commissioned by the Scottish Office to review service provision for women who had suffered domestic violence. It was published on 16 March.
I wish to announce to the House today that, with the Department of the Environment, Transport and the Regions, our women's unit is commissioning a survey and a research report that will review the current accommodation and support needs of women fleeing domestic violence in England. Local authorities and the Women's Aid Federation (England) Ltd. will be involved and we will ensure that our Scottish colleagues are kept informed of the methods and results.

Mrs. Gillan: Given the concern about violence against women, will the Minister tell us whether she agrees with the Secretary of State for Social Security, who believes that it is only by appointing more women judges that the Government can show that they are taking domestic violence seriously, or with the Lord Chancellor who, when putting down the Secretary of State, said that
We cannot have positive discrimination
in making judicial appointments and that he had
the fullest confidence that all judges, regardless of gender, already deal with cases of domestic violence with impartiality and consideration for the victims of domestic violence"?
I can see the Secretary of State prompting the Minister. Will she tell us independently who she agrees with the Secretary of State or the Lord Chancellor?

Ms Ruddock: I assure the hon. Lady that we are all concerned with achieving equality of opportunity. The Lord Chancellor has made it absolutely clear that he

believes that more women should have the opportunity to reach the highest levels in the court and justice system. We are all engaged in that and we have every confidence that, whatever judge is sitting on domestic violence issues, justice will be done.

Oral Answers to Questions — Child Support Agency

Mr. McNulty: If she will make a statement on the Government's policy in respect of reform of the Child Support Agency. [34045]

Mr. Baker: If she will make a statement on the principles underlying the Government's review of the Child Support Agency. [34052]

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): This Government believe that all children are entitled to the financial and emotional support of both their parents, wherever they live. We are examining closely all aspects of the child support system and we expect to bring forward our proposals for consultation by the summer.

Mr. McNulty: I thank my right hon. Friend for that response. Most people will agree with the principle of the CSA, but not with the cack-handed way in which it was introduced by the previous Government. Will she ensure that the outcome of any review is both fairer and simpler not just for parents and children, but for CSA staff, and that it is clearly linked both with the excellent Budget proposals on families and children and with the forthcoming Green Paper on welfare reform?

Ms Harman: My hon. Friend is absolutely right. Hon. Members on both sides of the House agree on the principle that parents should support their children. We further agree that that principle has not been put into practice properly by child support legislation and the agencies that work under it.
I invite the House to consider three further points. We face some difficult choices in the necessary reform of child support. First, what is the appropriate balance between the interests of the first and second families? Secondly, what is the right balance between a clear, simple and straightforward system and a complex system that deals very closely with individual needs? Thirdly, what is the right balance between the need of parents with care to receive income for their children and the interests of taxpayers not to have to support other people's children? Those are the three issues that the House will have to discuss further and come to an agreement on.

Mr. Rendel: Does the Secretary of State expect any new formula to apply only to new cases, or will it apply also to cases that have already been agreed under CSA regulations—which would lead to difficulties such as cases being reopened and redecided and a lot of losers?

Ms Harman: The hon. Gentleman makes an important point. We are trying to reform a system, but it is difficult to do so when we have a great tangle and a sense—and the reality—of injustice. For people who have had incorrect awards made and those who have had correct awards made but who have failed to pay, the issue of transitional arrangements will be critical in achieving public


confidence in the new and reformed system that we should like to see evolve. We will discuss with the hon. Gentleman and his colleagues how to deal with the transitional arrangements

Mr. Wicks: Given that the great majority of mothers and children on income support receive no child maintenance from their fathers, will the Secretary of State consider setting a new target to tackle the tough cases: the men who are determined never to pay a penny? In my advice surgery on Friday night, I met a mother who had supplied all the information that was needed to the CSA. Two years on, she is still not receiving a penny.

Ms Harman: My hon. Friend is absolutely right: there is a huge sense of grievance among absent parents— usually fathers—when there is a delay in assessing maintenance and then, suddenly, they are hit with large arrears that might turn out to be incorrect; there is also a burning sense of grievance among parents with care— usually mothers—that although a correct award has been made, fathers sometimes avoid paying.
We are dealing with difficult issues. We need to keep a sense of principle—that parents should be prepared to pay—but the system must also be fair. The problem is that the principle of parental payment has been undermined by very poor delivery and a failed administration.

Miss McIntosh: Does the Secretary of State agree that the Child Support Agency plays a crucial role in helping abandoned families? What percentage of staff time is spent processing matters relating to absent parents, whether they be male or female? How many appeals under the new procedure are being processed?

Ms Harman: There are 8,000 members of staff dealing with the 600,000 live case load, as it is called, but there are 800,000 further cases where no assessment has been made. I will write to the hon. Lady with any further detailed information that she wants.
It is not always a matter of an abandoned family. It is difficult to talk in absolutes about first or second families. The fact is that many marriages end in divorce, with faults on one or the other side, or on neither. Many children start life without their parents living together. We must strip away the ease of moral judgment and get a system that is fair to the taxpayer, the parent and, above all, the child.

Oral Answers to Questions — United Nations Commission on the Status of Women

Jane Griffiths: If she will make a statement on the recent meeting of the UN Commission on the Status of Women. [34046]

Ms Ruddock: In my role within the presidency of the European Union, I was delighted to represent the views of the European Union at the meeting of the Commission on the Status of Women at the United Nations earlier this month.
The issues addressed were women and violence; women and armed conflict; human rights of women; and the girl child. A copy of the statement I delivered at the UN has been placed in the House of Commons Library.

Jane Griffiths: Is my hon. Friend aware of the importance attached by women's organisations to

the previous UN meeting in Beijing in 1995 and the criticism levelled at the previous Government for having taken no action following that meeting? In view of that, have this Government taken action, in particular to protect the girl child against all forms of exploitation?

Ms Ruddock: I thank my hon. Friend for her question. The United Kingdom's participation in the CSW this year has been very successful. Throughout, our delegation has led on the need fully to implement the aims of the global platform for action. On the human rights of women, we argued for an end to customary and traditional practices that are harmful to women and girls such as female genital mutilation. On women and armed conflict, we proposed the creation of an international criminal court that would integrate a gender perspective in its statute. On violence against women, we called for national plans such as those that are in train in this country. On the girl child—a matter specifically mentioned by my hon. Friend—we were able, against very tough opposition, to get agreement on the provision of information and counselling services, to be carried out on a confidential basis, for both adolescent boys and girls, especially on the subject of personal relationships.

Oral Answers to Questions — Disabled People

Mr. Keith Simpson: What the benefit status of people with disabilities who take part in the welfare-to-work scheme will be. [34047]

Mr. Denham: The Government's new deal for disabled people will be offered to people with disabilities or long-term illnesses in receipt of the following out-of-work benefits: incapacity benefit, severe disablement allowance and income support.

Mr. Simpson: I thank the Minister for that answer, but can he give the House an assurance that people with disabilities who participate in the Government's welfare-to-work programme will not lose any of their entitlements, especially if they are put on to the jobseeker's allowance?

Mr. Denham: Yes. Participation in the programme will be voluntary, but the House will recognise that the Government are implementing a strategy with several strands: we want to improve the quality of personal advice for disabled people who are seeking work; we want to tackle discrimination in the workplace; we want to make work pay—in last week's Budget, we announced the introduction of a tax credit for disabled people; and we want to reform the benefits system by, for example, introducing the 12-month linking rule for those on incapacity benefit.

Mr. Skinner: Does my hon. Friend agree that we do not need lectures from the Tories, whom we constantly had to fight during those tawdry years of Tory government to get disability legislation that would give equality to the 6 million disabled people in Britain? Will he also bear in mind the fact that the last thing we need from a Labour Government is a tax on disabled people's benefits? I was associated with the group Disability Rights Now in campaigning against the Tories. To prevent Downing


Street from being daubed with paint again, would not it be a good idea for the Prime Minister to stop inviting tinpot so-called music makers to No. 10 and instead to invite the disability rights people to discuss these important matters?

Mr. Denham: I can assure my hon. Friend that my right hon. Friend the Prime Minister has met organisations of and for disabled people to discuss welfare reform. I am sure that my hon. Friend welcomes the announced introduction of a disabled persons tax credit and that he will also recognise the importance of establishing the disability rights task force, which will lead to a disability rights commission and comprehensive and enforceable rights for disabled people.

Mrs. Browning: Is the Minister aware that there are types of disability whereby people fail to find work because of basic communication problems, despite their intellectual ability and training or higher education qualifications to do that work? What plans does he have to build on the previous Government's piloting of the mentoring system, under which such people had someone alongside them, both at interview and in the workplace, not to do training or the job, but to deal with communication difficulties?

Mr. Denham: We are anxious to explore a variety of ways in which we can enable disabled people who want to work to get into work. This Government—unlike the previous Government—have allocated £195 million from the windfall tax to fund a series of innovative schemes to consider the different ways in which the barriers that disabled people face in getting into work can be overcome. Bids are being received for the first 20 of those additional schemes. The hon. Lady will, I am sure, be keen to see which schemes have been put forward by the wide variety of voluntary organisations and others who have been involved in that process.

Oral Answers to Questions — Lone Parents

Mr. Fitzpatrick: If she will make a statement on measures relating to child care in the Government's new deal for lone parents. [34048]

Ms Harman: The new deal for lone parents is, for the first time, offering lone parents an opportunity to work. It is already available in eight areas of the country and it will be rolled out nationally to new claimants of income support next month. The new deal is backed by our national child care strategy, which includes substantial help with the cost of child care through the new child care tax credit that was announced in the Budget last week.

Mr. Fitzpatrick: I thank my right hon. Friend for that positive response. I recently had the opportunity to visit the Alpha Grove lone parents association on the Isle of Dogs in my constituency. It was very enthusiastic about the opportunities being offered under the new deal. Will she ensure maximum co-ordination between her Department and the Department for Education and Employment in introducing the new child care provisions so that lone parents can access them as soon as possible?

Ms Harman: I am working closely with my right hon. Friend the Secretary of State for Education and

Employment to ensure that we develop a national child care strategy that meets the needs of women for affordable, high-quality and accessible child care in all neighbourhoods. That is important not only for children's development, but particularly in helping lone parents into work. I know that the Benefits Agency—and the jobcentres—will work closely with voluntary organisations such as the Alpha Grove project to ensure that the new deal for lone parents serves the community.

Mr. Duncan Smith: Last week there seemed to be a bit of a dispute between the Institute for Fiscal Studies and the Department of Social Security and the Treasury about the cost of child care credits. The Red Book allowed for £1 billion for the programme, but the IFS estimated that it could cost £4 billion, assuming that take-up rates are in line with present take-up rates for general benefits. The family credit take-up rate of 70 per cent., which is sometimes criticised by the Government, would not seem out of line with the cost of £4 billion
What take-up rates have the Government allowed for in the child care credit assumptions? If their estimate is wrong and take-up is higher, will they guarantee that they have no intention of capping the amount that can be paid out?

Ms Harman: With new proposals such as this, we cannot simply refer to the take-up rates of existing benefits. The previous Government got into all sorts of problems when they grossly overestimated the take-up for child care allowance under the old family credit rules. Indeed, that is one of the reasons we have had to make a change and get rid of the child care allowance under family credit, introducing a proper new child care tax credit.
We do not think that the IFS figures are right. We think that the Treasury assumptions are right. The estimated cost of £250 million a year is based on expectations of demand and of the ability of the registered child care base to respond to that demand.

Ms Hewitt: Does my right hon. Friend agree that a comprehensive strategy must include time for parents to care for their children themselves, as well as nurseries and child minders? Does she further agree that the opportunities for part-time, as well as full-time, work under the new deal will enable many lone parents who so choose to combine earning a living and taking advantage of the working families tax credit with looking after their own school-age children?

Ms Harman: My hon. Friend is absolutely right. Those who have received the new deal for lone parents have warmly welcomed the fact that, so long as they can work 16 hours, which many can manage during a school week if their children are at school full time, they will get the top-up on their pay. Just as we will help people whose pay is depressed by ill health or disability, we will help those who can work only 16 hours or so to have decent take-home pay. What is more, we will help them with the costs of child care so they can be in work and make work pay.

Mrs. Virginia Bottomley: I want to reinforce the point made by the hon. Member for Leicester, West (Ms Hewitt). Is the Secretary of State aware that a


growing number of mothers feel insulted by the Government's apparent denigration of the contribution of women who choose to care for their children at home? She needs to emphasise strongly the point that she made in reply to the hon. Lady.
Will the Secretary of State repeat her assurance of co-ordination with the Department for Education and Employment? She might care to meet the group of women, working part time for a well-known national company, who have been told that, as a result of the Government signing the social chapter and other measures, it is no longer in the company's interest to employ them part time so they have the choice of being full-time mothers or full-time employees: a choice that they were not forced to face under a Conservative Government.

Ms Harman: I do not know what company the right hon. Lady is talking about, but if she wants to suggest a meeting, I shall be more than happy to consider it. I take exception to her suggestion that we appear to denigrate mothers who stay at home to look after their young children. Our proposals are simply a recognition of the fact that women are voting with their feet and going out to work. Nearly half the people in the work force are women and more than half the women with children under five—let alone those with children over school age—are working. The previous Government took no notice of that and did not support women in their choices.
We simply say that when women go out to work, instead of leaving them to struggle on their own to balance home and work responsibilities, we will help them with a flexible benefit system, advice and help regarding work, and proper child care. Mothers who stay at home will also receive the extra child benefit that my right hon. Friend the Chancellor announced in the Budget last week.

Oral Answers to Questions — Stakeholder Pensions

Mr. Flight: What representations she has received on the expected participation rates in the proposed stakeholder pension. [34049]

Mr. Denham: We have received more than 200 responses to the recent consultation on stakeholder pensions. The majority are from organisations including financial services businesses, employers, employee groups and trade unions. The Government see a key role for such organisations, particularly in partnership with each other, in developing and promoting stakeholder pensions.

Mr. Flight: If the pension fund industry recommends overwhelmingly that for the stakeholder scheme to succeed—in terms of adequate participation—it will need to be compulsory or have some degree of compulsion, is that something that the Government will consider?

Mr. Denham: It is true that a number of submissions to the pensions review strongly support compulsory second pensions. We already have a compulsory pensions system—the vast majority of employees are compelled to be members of both the basic state pension and a second pension. We made it clear that we would consider all representations received by the review, including those on compulsion, and would respond in due course.

Mr. Flynn: Will the Minister say that he is not minded to hand over the running of stakeholder pensions to those

very firms that mis-sold at least 2 million personal pensions and left a large number of people facing poverty in their retirement years? Has he seen the Eagle Star submission, which lavishly praises the state earnings-related pension scheme, saying that it is the most portable of all pensions, is best value and has charges down to one tenth of those charged by the private firms? Indeed, Eagle Star complained that the only fault with SERPS is that its merits are not properly understood. Will he ensure that SERPS is properly considered and that we can have a rejuvenated form of it, independently funded and run, and separate from the national insurance scheme?

Mr. Denham: I have indeed read the Eagle Star evidence to the pensions review and can assure my hon. Friend that those are important issues for consideration by that review. He will also want to pay tribute to my hon. Friend the Economic Secretary for her action to clear up the problems of pensions mis-selling—in stark contrast to the record of the Conservative party, which did nothing to tackle that scandal although it was obvious for years that it needed to be dealt with

Mr. Viggers: Despite numerous references to low-cost pension schemes, does the hon. Gentleman agree that in fact pension costs will inevitably be high and that if any new scheme is not compulsory it will lead to a pensions benefit trap, which will be unfair and unacceptable?

Mr. Denham: On his question about compulsion, I refer the hon. Gentleman to the answer I gave some moments ago. I do not accept that it is inevitable that funded second pensions have to be as expensive and as inappropriate for those on low incomes or those who suffer intermittent working patterns as many personal pensions are today. I am confident that stakeholder pension schemes will be able to offer value-for-money, flexible second pensions to many people who cannot get such a pension at present.

Oral Answers to Questions — Benefit Integrity Project

Mr. Oaten: What representations she has received about the benefit integrity project. [34050]

Ms Harman: I have received a great many representations about the benefit integrity project. I have taken action to improve the quality of decision making in the project and am discussing it further with organisations of and for disabled people.

Mr. Oaten: Is the Secretary of State aware that one of the impacts of the benefit integrity project is that each month up to 80 disabled people lose their vehicles and have no means of transport? Does she regret that? Will she step in to stop it taking place?

Ms Harman: I very much regret the fact that if it is decided under the benefit integrity project that people are not entitled to higher-rate mobility allowance, their Motability car is taken away, but that if the benefit is restored on review it is by that time too late because the car has gone. The hon. Gentleman raises an important point that disability organisations have raised with us. We are talking to Motability about it and are determined to sort it out.

Mr. Blizzard: I welcome the extra safeguards that my right hon. Friend has introduced into the benefit integrity project to protect people when it appears that their benefit may be reduced or disappear under the project. Will she consider suggestions made by DIAL, the disablement information and advice line, that would result in fairness for disabled people under the project? For example, where additional evidence is required from a doctor, it suggests that the doctor concerned should interview the disabled person before responding, because doctors often do not know that person as, frequently, disabled people are not ill people.

Ms Harman: My hon. Friend makes an important point. The Government have a responsibility to ensure that, when we pay benefit, those in receipt of it are properly entitled to it. However, we are also concerned that, in checking people's benefits, we do not take benefit away from people who are entitled to it. As I said to the hon. Member for Winchester (Mr. Oaten), giving it back later after review or appeal does not sort the situation out. We want to ensure that we get decisions under the benefit integrity project right first time. On 9 February, I introduced an extra safeguard so that no decision to reduce or remove altogether entitlement can be made simply on the evidence of the claimant; we should have a further check. We are always open to suggestions about how to ensure that that happens. It is our duty to ensure that recipients do not receive benefit to which they are not entitled but we must also do all that we can to make certain that we do not take away from disabled people income to which they are entitled and on which they are dependent.

Mr. Boswell: Given that the Secretary of State has made much of the new safeguards, how many further such checks have been made and how many cases are outstanding? Is she satisfied that, after the safeguards have been implemented, there will be no more cases of inappropriate withdrawal of benefit?

Ms Harman: We do not yet have a breakdown of cases after 9 February, but I shall let the hon. Gentleman know as soon as we do because of his long-standing interest in the issue. Two thousand cases have been reviewed following a benefit integrity project decision to reduce or altogether remove benefit. Of those, 500 have had benefit instaured. Those figures showed us that too many decisions were going wrong and that we had to put in the extra safeguard. We do not yet have the analysis of the outcome of reviews and the ratio of correct decisions after 9 February but the intention of that change was not only to make things look better or to assuage people's fears but to get a better quality of decision making. If that has happened, the number of people whose benefit is restored under review should fall because we would hope not to have taken away the benefit in the first place.

Mr. Swinney: The House will welcome the 9 February announcement about improving decisions under the benefit integrity project. Before 9 February, many people had their benefit withdrawn and have lost appeals. I met one of those people at my surgery on Saturday in Brechin, a desperate lady who failed to secure an appeal. I suspect that, if her case had been examined after 9 February, she would have been in a much better position. Will the

Secretary of State undertake to re-examine all cases considered before 9 February where benefit was reduced? The problem is causing enormous hardship to many vulnerable people.

Ms Harman: The objective of the 9 February change was to make the initial decision under the benefit integrity project more likely to be correct. We are trying to speed up reviews so that people do not have to wait 10 or 20 weeks before their cases are reassessed. As the hon. Gentleman knows, the rule for examining entitlement under the review involves considering legal entitlement and the evidence. The review is a second check. He knows that the appeal system is independent. Hon. Members will agree that we must check that people in receipt of benefit are entitled to it and that their circumstances have not changed in such a way that they are no longer entitled to it. We must ensure that the initial benefit review decision is correct.

Dr. Iddon: I am sure that my right hon. Friend realises that those who are mentally ill and who have the threat of losing benefit hanging over them can experience special problems. Are any special instructions given to the benefit integrity project on the reassessment of people with those special difficulties?

Ms Harman: MIND is one of the organisations that have been prepared to talk to us about how we can improve the initial letter that lets people know that there is a review process under way and tells them what their rights are in relation to that. There are clearly difficulties regarding people suffering mental ill health and we want to make sure that we work fairly by them. One of the problems is that, because we wanted the letter not to be alarming and frightening, the original letter notifying people that they were going to be reviewed lulled them into a false sense of security about what the process was about; as a result, people did not always bring forward the necessary information. A balance must be struck between letting people know what the exercise is about and not unduly scaring them. We are grateful to MIND and other organisations for working with us to try to get the situation right.

Oral Answers to Questions — Low-income Home Buyers

Mr. Webb: What plans she has to improve the help given to low-income home buyers with their mortgage interest payments. [34051]

The Minister for Welfare Reform (Mr. Frank Field): rose—

Mr. Burns: Ah.

Mr. Field: The hon. Gentleman says, "Ah"—

Madam Speaker: Order. This is taking much too long. Members should put their questions briefly and Ministers should answer them briefly. The previous question, although an important one, took eight minutes, which was far too long. The hon. Member for Northavon (Mr. Webb) has asked his question and is waiting for an answer.

Mr. Field: The best form of protection for all home owners is private insurance, and we are working with the


industry to develop better products and to improve take-up. We shall consider changes to the benefit arrangements as that work progresses.

Mr. Webb: I am grateful to the right hon. Gentleman for that response. Is he aware that, when it surveyed unemployed people on income support, his own Department found that, whereas only one in six mentioned child care, one in three mentioned loss of help with housing costs in low-paid work? Does he accept that the lack of help with mortgage interest for people in low-paid jobs is a serious barrier to moving off welfare and into work? Does he have any plans to deal with that?

Mr. Field: As the hon. Gentleman knows, the Government are reviewing welfare reform and will report on their findings on Thursday. The House should be aware that the scheme favoured by the hon. Gentleman, if it was modelled on housing benefit, would cost about £750 million. If there were £750 million spare, it would be interesting to see whether the House decided to spend it in the way the hon. Gentleman wants, or in other ways.

Mr. Pike: Can my hon. Friend confirm that, as soon as MIRAS is changed next month, the benefits system will be changed to ensure that people are not put in difficulties with their interest payments?

Mr. Field: As my hon. Friend knows, the payments made for mortgage interest are a tracking arrangement and we shall, in due course, take into account changes in the mortgage interest rate.

Oral Answers to Questions — Disability Benefits

Mr. Winnick: If she will make a statement on the proposed changes to disability benefits. [34053]

Mr. Denham: As announced in the Budget statement, we shall provide extra help for disabled people who want to work through the extension of the invalidity benefits linking rule and the removal of voluntary work limits from October this year. In addition, the transformation of disability working allowance into the more generous disabled person's tax credit from October 1999 will mean extra financial help for those who get a job.

Mr. Winnick: Does my hon. Friend accept that the Labour party has always been the champion of the disabled? I hope that we shall always remain so. If he does, does he also accept that those who are disabled and not in a position to work should in no way be penalised and that there is no justification for means-testing or taxing the benefits received by the disabled? In that way, we could demonstrate our continued support for those who suffer disability.

Mr. Denham: My hon. Friend is right to say that there will be those who are not able to work, but who are sick or disabled, and I can assure him that they have nothing to fear from this Government. The Government will always provide support for those in genuine need and, in the course of the welfare reform reviews that are taking place,

we shall look at the best ways to provide support for those disabled people who are unable to take opportunities to work.

Mr. Gibb: Will the Minister now answer the question asked by the hon. Member for Walsall, North (Mr. Winnick) and say whether the Government intend to tax or means-test the disability living allowance?

Mr. Denham: We have clearly set out the basis on which we are approaching welfare reform. We recognise the extra costs involved for those who have disabilities. In the course of that welfare reform, we must identify the right way of providing support for those who need it.

Oral Answers to Questions — Benefit Payments

Mr. Simon Hughes: What is the average delay between applications for benefits and payment of benefits by agencies accountable to her Department. [34054]

Mr. Field: This Department deals with over 20 benefits. There are 48 targets measuring performance on the clearance of new applications. We are currently achieving 90 per cent. of those targets.

Mr. Hughes: That was a pretty obscure answer, but no doubt it can be pursued. Does the Minister accept that, whatever the general position may be, in some places there are huge delays between the application for, and the payment of, benefits? That can mean the loss of entitlement. I understand that the causes of delay are often overstretched staff, people off sick, posts unfilled and a 25 per cent. cut in finance. Does the Minister accept that one thing he could do would be to reinstate district office factors, so that terribly over-pressed offices, such as mine in south London, which have to deal with many asylum seekers, mentally ill people and other difficult cases, have the funding to deal with their heavy and difficult case load? That would allow such applicants to get their benefits as soon as anyone else.

Mr. Field: If the hon. Gentleman writes to me, I shall consider that idea seriously.

Mr. Burns: Would the right hon. Gentleman care to comment on the delays in the payment of winter fuel benefits to non-income support pensioners, who are having to wait up to nine weeks for what is becoming a summer supplement, not a winter fuel benefit? Would he also care to comment on the 9,000 pensioners on income support and living in residential homes who have erroneously received cheques—some of which have been cashed while others have not? Will the Government seek to claw back that money?
Finally, on the question that the Secretary of State failed to answer last Thursday, is the Minister aware of the developing problem among some non-income support pensioners which has meant that, instead of couples receiving two cheques for £10 each, some are receiving two cheques for £20 in winter fuel benefits? What will the Government do to rectify that cock-up?

Mr. Field: In answer to that eight-minute question, I should like to remind the hon. Gentleman that, probably


by the end of this week, all 10 million or so pensioners will have received their payments. Only 15,000 are still waiting to receive them. The benefit had to be introduced from scratch because the Opposition, when in government, did not think it important to deliver extra help in that way.
When the hon. Gentleman was in government and the Government of the day used to come to the House waving pieces of paper, not a day went by when he did not get up and tell the House about how important those pieces of paper were—the most important, in fact, since the previous day. His approach to Government initiatives could not have been more constructive. Since going into opposition the hon. Gentleman has fallen among bad friends. I believe that his constituents would prefer the constructive Member whom they had representing them in the days when the hon. Gentleman sat on Government Benches to the person who has clearly become a whinger in opposition.

Oral Answers to Questions — Old-age Pension

Mr. Corbyn: When she expects to announce the basis on which the state old age-pension will be calculated. [34055]

Mr. Denham: We said in our manifesto that the basic state pension will be retained as the foundation of pension provision in retirement and be increased at least in line with prices. We are considering all aspects of the basic pension as part of our pensions review, which will report later this summer.

Mr. Corbyn: Can the Minister confirm that, since the Conservatives broke the link with earnings in 1980, £11 billion has been taken out of pensioners' pockets; and that to reinstate the link would cost £500 million a year? Reinstatement would eliminate poverty among some people in retirement and reduce the pressure on those approaching retirement to take out expensive and inefficient private pensions instead of relying on state provision. Will the Minister ensure that the pensions review guarantees a return to the link with earnings which the Tory Government so cruelly broke?

Mr. Denham: The pensions review is considering all those issues and we are consulting closely with representatives of pensioners' organisations—something that the Conservatives never did in their 18 years in government. Ahead of the outcome of the pensions review, the Government have taken the unprecedented step of making £200 million available for winter fuel payments this year, and will do the same next year.

Oral Answers to Questions — Cancer Treatment (Women)

Dr. Gibson: What steps she is taking to ensure that women receive equality of treatment for ovarian and other cancers throughout the United Kingdom. [34056]

Ms Ruddock: The Ministers for Women are deeply concerned about women's health and are routinely in contact with colleagues at the Department of Health. I am aware of a recent parliamentary meeting on ovarian cancer organised by my hon. Friend the Member for Brentford and Isleworth (Ann Keen) and concerns that were

expressed at that meeting about inequalities of treatment. My right hon. Friend the Secretary of State for Health has set out the Government's intention to improve the consistency of treatment for cancer in our White Paper "The New NHS".

Dr. Gibson: I thank the Minister for that answer. She will be well aware that, each year, 6,000 people are diagnosed with ovarian cancer and 4,000 women die from it. Does she agree that clinical treatments should be equalised throughout the country, and that women should be provided with all the clinical options so that they can participate in decision making on the treatment? Does she further agree that, in the national health service, treatment with Taxol is not provided equally across the country, and that that is a sad indictment of the NHS internal market and the high cost of that drug?

Ms Ruddock: Since the meeting that I mentioned, I have raised that issue with the Department of Health. That Department is aware of variations in cancer services, and the availability of drugs such as Taxol is one aspect of that variation. I understand that health authorities and trusts are working to remedy that, but we must leave them some discretion to tackle first what they regard as the most pressing local needs.
People are, however, right to expect broadly similar services wherever they live. The White Paper guarantees that everyone with suspected cancer will be able to see a specialist within two weeks of a request by their GP for an urgent appointment, and that guarantee will apply to those suspected with breast cancer from April 1999, and to all other cases of suspected cancers from the following year.

Oral Answers to Questions — Pension Funds

Dr. Julian Lewis: What representations she has received on the impact of the abolition of the advance corporation tax dividend on pension funds. [34058]

Mr. Denham: A number of organisations with an interest in pensions have written about this matter.

Dr. Lewis: Will the Minister encourage private pension fund managers to inform their pension holders by how much they must increase their monthly contributions to make up the shortfall in their pension funds—or would the Government rather keep their victims in ignorance, in the finest traditions of the late Robert Maxwell?

Mr. Denham: That is a remarkable question from the party that was responsible for the mis-selling of personal pensions on an unprecedented scale. I make it clear that it is a responsibility of private pension providers to provide best advice to holders of their policies.
The best thing that we can do for pension provision is to lay the basis for sound, sustainable economic growth, which achieves high levels of investment and produces the wealth from which all our pensions will be paid. I believe that both the Budget in July 1997 and last week's Budget will achieve just that.

Mrs. Dunwoody: Is it not important that people are given accurate information about their pensions, whether


from the private or the state sector? Is my hon. Friend aware that it was a previous Labour Government who sent in the inspectors of Mr. Robert Maxwell and produced a report which said that, under no circumstances, should he ever be given any support, and that a Conservative City of London proceeded to lend him as many millions as he asked for?

Mr. Denham: My hon. Friend makes an interesting point. I agree that it is important to ensure that people receive accurate information about their pension provision. That is why the Government have set up the pensions education working group to examine how to raise the level of awareness about financial and pensions information. I anticipate receiving that group's report in the next few weeks.

Oral Answers to Questions — Violence Against Women

Ms Southworth: What plans she has for tackling violence against women. [34059]

Ms Ruddock: The purpose—

Ms Southworth: rose—

Ms Ruddock: I think that hon. Members are trying to follow your diktat, Madam Speaker, and make their questions rapid and brief.

Madam Speaker: It also applies to Ministers.

Ms Ruddock: I shall try, Madam Speaker.
The purpose of the national strategy on tackling all forms of violence against women is to create a safer environment for women at home and in the outside world by working to eliminate all forms of violence against women and to empower women to challenge abuse. It will cover the safety of women in personal relationships, on transport, at work and in the community.

Ms Southworth: Will my hon. Friend join me in welcoming the two-day conference that will be held in my constituency next month, when local agencies will meet to develop a community plan to take action against domestic violence? Does my hon. Friend agree that those kinds of partnerships are essential if we are to deal with domestic violence, which is an abhorrent crime in which the perpetrators attempt to intimidate the victims so that they are too afraid and ashamed to speak out? Can my hon. Friend confirm that the Government will speak out on behalf of the victims and will root domestic violence out of our society?

Ms Ruddock: I thank my hon. Friend for her question. I confirm that the Government are absolutely clear about the fact that domestic violence must be stamped out. I certainly commend the conference to which my hon. Friend referred and I commend partnerships. I recently witnessed an excellent partnership in Norwich involving the local authority and the housing department, which have worked with the police to enable a community care alarm provision for the elderly to be used also by victims of violence. There are many good practices out there from which we can all learn.

Mr. Brazier: I welcome the Minister's earlier answer. Will she confirm that one form of domestic violence that

is even more common than violence against women is domestic violence against children? Will she reassure the House that children, who have no votes or voices, will be included in the Government's consideration of domestic violence issues?

Ms Ruddock: The hon. Gentleman is absolutely right: the whole Government are deeply concerned about all aspects of child abuse. When we examine domestic violence—which is categorised as violence affecting adults—we also take into account the effects of such violence upon children. The hon. Gentleman is correct to believe that we are building that consideration into our strategy of concern. My colleagues across government are also paying particular attention to all aspects of child abuse, which we wish to see removed from our society.

Lorna Fitzsimons: Although we acknowledge the insidious crime of domestic violence, it is important that the Government strategy makes people aware that our priority is not only domestic violence but all forms of violence against women. Will my hon. Friend tell us something about the cross-departmental workings that are going on to ensure that women can participate fully in the home, in the world of work, on transport and in the community without the fear of violence?

Ms Ruddock: I reiterate that the strategy that we are developing seeks to combat all forms of violence against women, including violence against women on transport. In terms of cross-Government working, I assure my hon. Friend that the women's unit and the Ministers for Women are having key input into the co-ordinated transport strategy document being developed by our colleagues in the Department of the Environment, Transport and the Regions. It is essential to put women's concerns into all aspects of Government policy. We know that women fear violence when travelling on public transport and we hope that we can do much to make it safer for them in reality while addressing their real fears.

Oral Answers to Questions — Winter Fuel Payments

Mr. Baldry: What percentage of those entitled have received their full entitlement of help towards winter fuel costs. [34061]

Mr. Denham: Winter fuel payments have been an enormous and unprecedented exercise involving the issue of almost 10 million payments to more than 7 million pensioner households. As of today, payments have been dispatched to more than 99 per cent. of eligible pensioners. About 15,000 payments remain to be issued over the next few days.

Mr. Baldry: I am sure the Minister will agree that, until recently, the scheme was a bit of a shambles, with large numbers of payments being made very late in the day. After all the problems this year, can he give the House an undertaking that, if the scheme continues for a further year, it will run more smoothly next year?

Mr. Denham: I do not agree that winter fuel payments have been a shambles. They have been a great success. The Opposition did nothing to provide pensioners with help with their winter heating bills over 18 years in office.


The winter fuel payments will be made again next year, and we shall examine the procedures to see what, if any, lessons can be learnt from this year's successful exercise.

Oral Answers to Questions — Pensioner Incomes

Mr. Dismore: What assessment she has made of inequality in pensioner incomes. [34062]

Mr. Denham: We want today's and tomorrow's pensioners to enjoy security in retirement. Income inequality between the best and worst-off pensioners has grown since 1979, and estimates show that that inequality is set to widen in the future.

Mr. Dismore: Is my hon. Friend aware that a quarter of pensioners are on income support, and that pensioner

poverty is a serious problem, particularly in Burnt Oak and Colindale wards in my constituency? Next week, I am due to visit a pensioners luncheon club. Can my hon. Friend tell me what progress I can report to those pensioners when I meet them?

Mr. Denham: A quarter of pensioners are entitled to income support, but many of them are not receiving it. That is why, next month, we are launching nine pilot projects using the most up-to-date computer data techniques to identify those pensioners. We shall work with local authorities and local voluntary organisations to find the best ways of encouraging them to do so. I hope that, on my hon. Friend's visit to the lunch club, he will raise awareness of the Government's action for the poorest pensioners.

Police Complaints and Discipline

The Secretary of State for the Home Department (Mr. Jack Straw): With permission, Madam Speaker, I wish to make a statement about the Government's response to the Home Affairs Committee report into police disciplinary and complaints procedures. I am placing in the Library a copy of the response to each of the Committee's conclusions and recommendations. I thank all members of the Committee for the thoroughness of their work.
I begin by praising the honesty and integrity of the vast majority of police officers in this country. Their job is a difficult and dangerous one. As a society, we make huge demands of them. We have a police service that is one of the finest in the world.
The reputation of the service is put at risk, however, by a very small minority of officers whose behaviour falls below the standards that the public rightly expect. The actions of those officers undermine the work of honest officers, and shake public confidence in the service as a whole.
I am therefore determined to give the police service the powers it needs to deal effectively with that small but corrosive minority of bad officers. The Home Affairs Committee's report made a compelling case for change. I am announcing today the steps that I am taking to implement most of its recommendations.
A debate on reform of these procedures has been going on for five years, since the previous Government launched a consultation paper in 1993. At the heart of that debate has been the issue whether arrangements in the service should be brought more into line with normal employment practice in other fields. The burden of the Home Affairs Committee's report is that they should.
The time has come for the Government to take decisions on the report's recommendations and to act upon them. I have been helped in this by the constructive and professional approach adopted by the Police Federation, the Police Superintendents Association and the Association of Chief Police Officers.
One illustration of this approach is the widespread agreement already achieved with the staff associations that the police need new procedures for tackling poor performance by individual officers, and procedures that are separate and different from those needed to deal with disciplinary matters. I accept the Committee's recommendation that the new procedures should be introduced without delay.
Let me deal first with procedures for discipline. First, I have decided that the standard of proof in disciplinary cases should be changed from the criminal to the civil standard. I am alive to the argument that some officers might be less likely to tackle criminal behaviour through anxiety that this change could leave them vulnerable to unfounded or malicious complaints. However, the civil standard of proof has operated fairly in the police service in Scotland, and there is no evidence that this has undermined officers' effectiveness there.
Moreover, I have every confidence that, with this change, police officers as a group will continue to act in the public interest. Nevertheless, I am discussing with the

police associations the possibility of conducting attitudinal research to monitor the effect of the change among police officers.
There are circumstances in which conduct may constitute a breach of discipline although it has not been proved to be a criminal offence. However, at present an officer acquitted of a criminal offence may not be charged with an equivalent disciplinary offence, principally because the standard of proof is the same in criminal and in disciplinary proceedings. In future it will be possible for officers to face both disciplinary and criminal action on the same facts. This will bring the police into line with the position of most others in the public and private sectors.
I am also accepting the Committee's recommendation to end the "right of silence" of officers in disciplinary hearings, and to apply the same modified caution as laid down in the Criminal Justice and Public Order Act 1994.
At the moment, officers who face the loss of their job or rank as a result of a disciplinary proceeding are entitled to legal representation at all stages of formal disciplinary action. The Committee recommended that this right should be maintained only for those officers who are at risk of losing their jobs.
However, I have decided to retain the status quo, so that officers facing reduction in rank also retain their right to legal representation. In addition, I am rejecting the Committee's recommendation that discipline hearings should be held in public—although the public have a right to know the outcome of proceedings, it would in my view be manifestly unfair to officers facing discipline to have their cases dealt with at a public hearing.
For the most serious cases, the Committee recommended that chief officers should have available to them a system of "fast track" dismissal. I have decided to accept this recommendation. This system will need detailed and careful work before it can be ready for implementation. There will be discussions with the police staff associations about the appropriate procedure. The fast-track procedure will be within a framework of a fixed timetable of no more than six weeks from beginning to end. The procedure would include the right to legal representation and the right of appeal. Officers will be able to be suspended from duty immediately, as is the case now.
There is one serious defect in the present practice that causes very great public concern. This is where a police officer's retirement on ill-health grounds is agreed before disciplinary proceedings can be completed, thus ending all prospect of disciplinary action against an officer. As the House knows, the inability to complete disciplinary hearings after the Hillsborough disaster has quite rightly been a cause of great anger and frustration to the families of victims.
The procedures will therefore be strengthened so that where accused officers claim that they are unable, through ill health, to appear at disciplinary hearings, matters can be decided in their absence, but with appropriate safeguards. I shall also be securing a rigorous application of the existing regulations so that any outstanding disciplinary matters have to be completed before any application for early retirement can be considered.
I intend to take firm action against officers convicted of criminal offences connected with their work. At present, police authorities may apply to me for a


certificate to forfeit the pension of any such officer, but this is at their discretion. In future, police authorities will be asked to refer all such cases to me automatically. It is abhorrent that public money should be paid out to those very few officers who are convicted of criminal offences and who abuse their position of trust.
It is my aim to introduce all these changes in England and Wales with effect from 1 April 1999. As the Northern Ireland discipline regime mirrors the one for England and Wales, I have consulted my right hon. Friend the Secretary of State for Northern Ireland on my response. My right hon. Friend agrees with my proposals, and will be implementing them in Northern Ireland.
Let me turn now to the Committee's recommendations on complaints, which need to be considered separately. Independence and openness are the key to greater public confidence in the police complaints system. The Committee's proposals point the way forward. However, some of its proposals require legislation, and many have significant resource implications. Against that background, I intend to make progress on those changes that do not require primary legislation.
I accept the Committee's recommendation that the Home Office should conduct a detailed feasibility study of different arrangements for an independent police complaints investigation process. I also accept the Committee's view that, in the absence of a totally new investigative body, fundamental changes to the complaints process would be premature, but that, in the meantime, the Police Complaints Authority should make robust use of its existing powers.
I accept in principle the Committee's recommendation that the PCA be given the powers and the funds to commission independent investigations in cases where there is reason to believe that the existing process is inadequate. However, that would involve significant extra costs, which I am afraid make early change here unlikely.
The Committee recommended that either the PCA or any other independent review body should be able to undertake investigations whether or not the matter has been the subject of a complaint. In the light of this, I am minded to propose that, as Home Secretary, I should be given a power to request or require the PCA to initiate and oversee such investigations where this is in the public interest.
Many people make a complaint about the police, which, for one reason or another, is not then recorded. The Committee proposes a relatively straightforward change to the recording of complaints, which would make the current system more responsive to public concerns. It suggests that all representations that could constitute a complaint should be registered by the police, with a right of appeal to an independent body for the complainant where there is a disagreement; and that it should be possible for a complaint to be registered directly with the PCA in certain circumstances. I accept those recommendations.
I have considerable sympathy with the criticism of the Committee that the existing arrangements are not sufficiently open to public scrutiny. The Committee therefore recommended that investigating officers' reports should be subject to disclosure on the same basis as other documents relating to a complaint. It also recommended

that investigation files relating to deaths in custody should generally be made available to the deceased's family before inquests.
Those recommendations raise difficult issues. The reports of investigating officers form a class that the courts have ruled is entitled to public interest immunity, although the police can be directed to disclose a report where a court is satisfied that the public interest of disclosure would outweigh the public interest of preserving confidentiality.
On inquests, the High Court has held that a person is not entitled in advance of the inquest to see copies of statements provided by the police to coroners. At the moment, the release of such documents is at the discretion of the police, but I accept some of the Committee's criticisms, and I am therefore giving further consideration to the scope for changes in this area.
My detailed response to the Committee deals with other confidence-building changes that it has recommended. Some of the recommendations on the complaints system that I have accepted will require primary legislation. The Government will look for suitable opportunities to introduce such changes. Much detailed work and consultation is required with ACPO, the police staff associations, the Association of Police Authorities, and other interested parties. This further work and consultation will begin straight away.
In considering the Committee's recommendations, I have paid full regard to the implications for all police officers who every day fight crime and disorder, and who protect the public. I have no intention of making police officers more vulnerable to malicious complaints about the way in which they do their jobs; but, equally, we must deal robustly with wrongdoing by a very small minority of police officers if public trust is to be preserved. Uppermost in my mind has been protecting the deservedly high reputation and standing of the police service as a whole.
In this country, we police by public consent, and that consent depends on public confidence and trust. The measures that I have announced today will strengthen the people's trust and confidence in their police service, and I commend them to the House.

Mr. James Clappison: I am grateful to the Home Secretary for letting me have a copy of his statement in advance. As I think he already knows, my right hon. Friend the Member for North-West Cambridgeshire (Sir B. Mawhinney), the shadow Home Secretary, is unable to be present because he is at a funeral.
Before making a number of detailed points, let me ask the Home Secretary whether he agrees that the overwhelming majority of our policemen and women are honest, decent and brave, and that they are as anxious as anyone for the small minority whose conduct falls below the required standard to be dealt with effectively.
Is the Home Secretary satisfied that the new arrangements following the change from a criminal to a civil standard of proof in disciplinary cases will contain sufficient safeguards to protect honest and decent police officers from unfounded and malicious complaints? In particular, is he satisfied that there will be sufficient safeguards in cases in which serious allegations have been made, and in which serious sanctions could follow? Will


the same standard of proof—which is now to be the civil standard—apply in both the less serious and the more serious types of case? What will the position be in cases that could lead to criminal charges?
The Home Secretary has said that he is alive to the risk that some officers might be less likely to tackle criminal behaviour through anxiety as a result of the changes that he has announced today. Will the research into attitudes to which he referred take full account of that, and will that research be wide-ranging and cover each of the 43 police forces? Does the Home Secretary accept that there is a difference between criminal behaviour on the part of an officer and inadequacy on the part of an officer in the face of a particular situation, and does he agree that the disciplinary procedure should reflect that? On the fast-track procedures, will regard be given in future to the need not to prejudice a criminal trial when such procedures are operating? There is also the question of retirement on ill-health grounds before disciplinary proceedings. Will it be possible for disciplinary hearings to be held under existing arrangements when an officer cannot be present as a result of ill health?
If hearings can be held under existing arrangements, will the Home Secretary tell us exactly what changes he is proposing? Will he also say whether any of the measures that he proposes will have an effect on police officers' own pension contributions? Will he tell us what will be the remit of the feasibility study for an independent complaints process, and whether its report will be published?
Finally, does the Home Secretary agree that, in seeking to deal with corrupt and bad police officers, we should never lose sight of the need to protect good and honest police officers, who form the vast majority?

Mr. Straw: I entirely accept that the right hon. Member for North-West Cambridgeshire (Sir B. Mawhinney) cannot be present because he is attending a funeral. I also entirely concur—as was suggested by my opening remarks—with the opening and closing observations of the hon. Member for Hertsmere (Mr. Clappison) about the high levels of probity among the vast majority of police officers. The changes in the disciplinary process are needed to protect not only the public, but through officers.
The hon. Gentleman asks eight specific questions; I shall deal with them as quickly as I can. Will there be sufficient safeguards to insure against unfounded malicious complaints that lead to disciplinary action? Yes, I believe that there will be. One of the matters that the Select Committee considered is whether there should be a new offence of making a malicious complaint, but it decided against that. The associations, which made the suggestion, are not especially enthusiastic about it, although I have already told them privately that if they can make a strong argument in the light of experience, I shall consider it. The vast majority of investigations that lead to serious disciplinary action being taken against police officers are not promoted by complaints from members of the public, but arise through internal investigations by the police.
The hon. Gentleman asks whether the burden of proof would be the same in serious, less serious and more serious cases. Yes, it would be but the application of that burden of proof in practice will be higher the more serious the case, because that is the way in which tribunals operate.
The hon. Gentleman also asks whether the research into attitudes, which we are discussing with the police associations, would take full account of the anxieties of police officers—yes, it would. He also asks whether it would examine practice in all 43 forces. I doubt whether that would be possible, because it would inevitably be a sample survey, but we shall cover as much of the country as we can.
The hon. Gentleman asks whether I accept that there is a clear distinction between criminal behaviour by a small minority of officers and officers' inadequate conduct in the heat of circumstances. I accept that. One of the changes that the associations have already embraced is a need to deal with poor performance in a separate way from disciplinary processes.
The hon. Gentleman asks whether the fast-track procedure should be set up in a way that should not prejudice criminal trials. That will be a sine qua non of using that procedure. Disciplinary action that leads to the dismissal of an individual but does not prejudice a subsequent criminal trial can be taken in many other walks of life, such as the Prison Service and the police service in Scotland.
The hon. Gentleman asks whether existing arrangements provide for the hearing of cases of officers who are absent on grounds of ill health. In practice, they do not. I shall write to him about whether the small print provides that they should, but, whatever it says, the truth is that at the moment officers can evade proceedings on disciplinary grounds if they put in a sick note.
The hon. Gentleman asks whether the feasibility study into complaints will be published. I intend to publish as much of it as possible.

Mr. Chris Mullin: I welcome my right hon. Friend's statement: rarely has a Select Committee report been responded to as swiftly and as fully as this one. Will he accept from me that this is a good day not only for those of us who care about upholding public confidence in the police, but for the Select Committee system as a whole?
It is now up to chief officers robustly to use the new disciplinary powers that they have been given and not, as some have in the past, to fail to use the powers at their disposal when they should have done.
I was not sure what my right hon. Friend was saying on complaints, but one of the difficulties presented to us during our investigation was that chief constables occasionally refused to refer a complaint to the Police Complaints Authority: the authority wanted to pursue a complaint, but it was hamstrung. Is my right hon. Friend saying that he will allow the PCA to pursue complaints that it deems should be pursued?

Mr. Straw: I thank my hon. Friend, who is the Chairman of the Select Committee, for his remarks. I pay tribute to members of the Select Committee for their work, but I particularly want to pay tribute to my hon. Friend. I entirely share his view that this is a good day for the Select Committee process.
In 1979, the Leader of the House, Mr. St. John-Stevas, as he was then, proposed the establishment of the departmental Select Committee. There was some scepticism about whether the process would advance the work of the House. I am in no doubt that it has, and this


report shows that a Select Committee is far better placed than an interdepartmental inquiry to bring out the issues that are central to the problem of police complaints and discipline. It is a good example of Parliament and Government working together.
I assure my hon. Friend the Member for Sunderland, South (Mr. Mullin) that I shall urge chief officers to use these powers robustly. The Police Federation has said that chief officers have not used some of their present powers robustly, and that is a fair criticism. They have the power not to allow retirements on ill health until disciplinary processes have been completed. Too often, they have taken the easy way out and have got rid of a bad apple by allowing him to retire early: they must stop doing that.
My hon. Friend asked whether the Police Complaints Authority will be able, of its own volition, to initiate an inquiry if a chief officer fails to pass a case on to the authority. I propose that the Home Secretary of the day should be given the power to direct the PCA to initiate an inquiry in such circumstances.

Mr. Richard Allan: The Liberal Democrats welcome the Select Committee report, and are pleased that the Home Secretary has responded to it so positively. Will he explain how he plans to widen access to the findings of the complaints procedure?
My hon. Friend the Member for Harrogate and Knaresborough (Mr. Willis) and I expressed concern about the use of public interest immunity to block a recent report into the goings-on at Harrogate police station after allegations of serious sexual harassment. Does the Home Secretary share our view that greater rather than less access is in the public interest? Will he rectify the current situation whereby large amounts of taxpayers' money are spent but no findings are published?
Will the new restrictions on retirement and ill health apply to all ranks, including the most senior? Some of the more controversial cases in recent years have involved senior ranks up to chief constable. Will they be subject to the same rules? Will the Home Secretary consider putting in place a mechanism whereby junior officers can raise issues of concern about the use of the lower burden of proof? We share the Committee's view that the lower standard of proof is appropriate, but junior officers have a legitimate concern about possible abuse by senior officers. Does the Home Secretary plan to offer junior officers a way to raise such concerns?
I hope that the Home Secretary shares our view that the outcome of these changes should be an increase in the morale of the police by sorting out the odd few bad apples, and an increase in public confidence, which should be a good measure of whether the system is effective. People should go through the formal procedure rather than resort to the civil courts, as they have increasingly been doing.

Mr. Straw: I thank the hon. Gentleman for his support for my statement and for the work of the Select Committee.
I am giving further consideration to the complicated problem of providing greater public access to the findings of the complaints procedure. People who are subjected to the disciplinary process have rights, which is why the

courts have taken the view that public interest immunity should apply to them as a class, save if a court decides that PII should not apply in the interests of justice.
We are considering whether, under the Freedom of Information Bill, some of the constraints on the publication of reports by the Police Complaints Authority should be lifted. I shall inform the House of my conclusions at a later stage.
The new proposals will apply to ranks up to and including the rank of chief superintendent. Discipline of ACPO ranks—chief officers—are dealt with by police authorities. I accept that there may be some implications for police authorities, and we shall discuss those matters with the Association of Police Authorities, the Association of Chief Police Officers and the new staff association for chief officers, whose new acronym I forget.
The hon. Gentleman asks whether I accept that police officers may have some legitimate concern about the way in which the new process, particularly the lowering of the burden of proof, will work. I accept that there is some concern, and I have discussed that with the Police Federation. I hope that, over time, the concern is allayed. It has not been a problem for the police service in Scotland, or within the Prison Service. Even after a chief officer's disciplinary finding, there is a careful, two-stage appeal process, first to an independent tribunal and then to the Secretary of State himself.
Lastly, the hon. Gentleman asks whether I believe that the changes will raise police morale. Yes, I firmly believe that, because police morale and the dedicated, hard-working majority of officers are severely and disproportionately damaged by the work of a bad minority.

Mr. Kenneth Clarke: Is the Home Secretary aware that the only occasion on which I received a certain amount of barracking from a small section of the audience at a Police Federation conference was when I announced proposals on police discipline that were exactly the same as those that he has announced? Would he not be deterred by that, because I think that, in the many years that have followed, opinion has moved yet further, and that the vast majority of honest, hard-working police officers in the federation and elsewhere will accept that the proposals will enhance the already high reputation of the police service and not be a threat to it?
Has the Home Secretary firmly decided beyond further consultation that the possibility of disciplinary proceedings following acquittal on a criminal charge will proceed? It must be right to say that the facts that might demonstrate innocence on the criminal charge could still illustrate conduct that falls far below that which is expected of a serving police officer. It must be right for chief constables to consider that.
As many cases can give rise to criminal proceedings against a police officer or against a complainant and to possible disciplinary proceedings against a police officer, following his earlier reply, would the Home Secretary say that, in all ordinary circumstances, it must be right for the question of criminal prosecution and criminal proceedings to be disposed of altogether before any disciplinary proceedings start? It is difficult to conceive how, under the fast-track procedure or in any other way, criminal proceedings might not be prejudiced by findings at a


disciplinary proceeding to the disadvantage of either the officer or the cause of justice if the complainant benefits from a rather abrupt disciplinary hearing.

Mr. Straw: I pay tribute to the right hon. and learned Gentleman for his work on this matter. I am sure that the robust line which I have no doubt he took in dealing with this matter before the Police Federation some five or six years ago has helped to open up the debate. It is a matter for regret that, although his successor as Home Secretary initially endorsed the position that the right hon. and learned Gentleman when he was Home Secretary set out in a speech to the Police Superintendents Association in September 1993, he later backed off from making those changes. Some of them could have been introduced some time ago if it had not been for that.
The right hon. and learned Gentleman asks whether I accept that the changes may result in officers being dealt with under the disciplinary process although they have been acquitted by a criminal court. The answer is that, by changing the burden of proof, that must be the case. In some instances, officers either will not be proceeded against on a criminal charge because of the Crown Prosecution Service's view of the evidence, or will be proceeded against and acquitted but may still, rightly, be found guilty under a disciplinary process.
The right hon. and learned Gentleman asks whether I accept that, in all but the most exceptional cases, the criminal trial should be dealt with before any disciplinary processes are disposed of. I do not accept that. It depends on individual circumstances. It is rare for a police officer to face a charge of dishonesty, except in grave circumstances, and I am advised by the chief officers concerned that, in many such cases, it is essential for the officers to be dealt with, disciplined and away from the police service before the inevitably much longer criminal processes take their course.
However, I have made it clear that it is self-evidently critical that disciplinary processes in these circumstances would precede a criminal process only where the Crown Prosecution Service has taken the view that subsequent court proceedings would not be prejudiced.

Mr. Robin Corbett: I welcome my right hon. Friend's statement. Does he agree that the big difficulty is that the police are still seen to be investigating complaints themselves? I urge him to drive on as quickly as possible with measures to enable a more independent Police Complaints Authority to handle these matters sensibly, fairly and effectively, to attract the support of both police and public.

Mr. Straw: I certainly accept that part of the problem with the perception of the existing system is that the police are seen to be investigating themselves. This is a system that has grown up. It has been the subject of criticism by the Select Committee on Home Affairs, by hon. Members on both sides of the House and, it is fair to say, by the Police Federation, which represents the majority of officers, who also want an independent investigative process.
That said, my experience is that, precisely because the police investigate themselves, they conduct almost all these investigations with great rigour and considerable independence. However, there remains the problem of public perception.
It is for that reason that I have undertaken to conduct the feasibility studies to find out ways in which we can inject greater independence into the process of investigation of serious matters. I do not think that there is any case for greater independence in the process of investigating less serious matters, which, in other walks of life, are dealt with by internal management in any case.
My hon. Friend calls for a more independent PCA. The PCA is robustly independent. The issue is not its independence, but the independence of the investigative process itself.

Mr. Douglas Hogg: I welcome the Home Secretary's statement, and agree with much of it. However, may I direct the right hon. Gentleman to two issues: the balance of burden of proof, and pensions? Does he accept that, in serious cases, there must be great concern if the burden of proof is the civil one rather than the criminal one? Will he please look at that again?
Does the right hon. Gentleman accept that, although it is right that forfeiting a pension entitlement should be considered when a police officer is convicted, it is also right that the rules of proportionality should be observed, and that pensions should not always be forfeited; that should happen only in serious cases? Will he deal with the question asked by my hon. Friend the Member for Hertsmere (Mr. Clappison) on a police officer's contributions? Those are contributions that the police officer has made. Are they to be forfeit as well? That would seem to be a form of expropriation.

Mr. Straw: I do not accept the right hon. and learned Gentleman's view that there will be great concern about the change in the burden of proof. I know that he took a different view when the matter came before the Select Committee. I think that, overwhelmingly, the advantage is in changing the burden of proof. There is no question of that in my mind. The only result of the present very high burden of proof is that police officers who are obviously guilty of the most serious corrupt practices are able to get away with their crimes—and crimes they are.
However, I have already said that I accept that there are anxieties among police officers. We will monitor the case. We will discuss how to do so in a positive way through attitudinal research, the terms of which we will agree with the police associations.
On the issue of forfeiting pensions, the right hon. and learned Gentleman asks whether I accept that the rules of proportionality should apply. Yes, of course I do. The sorts of case that we are thinking of are those in which police officers have been convicted of very serious corruption charges. In those circumstances, I do not believe that it is right for such officers to go on drawing pensions at public expense even while they are still in prison. That is unacceptable and has to end, but what I am talking about—to answer his third question—is that part of the pension that has been provided at public expense, not that part of a pension that is being provided out of the deferred salary of the police officer himself or herself.

Helen Jones: I welcome my right hon. Friend's reference to the tragedy suffered by the families involved in the Hillsborough disaster. Does he


accept that one of the greatest griefs felt by those families is that one of the senior police officers involved was able to avoid disciplinary proceedings by retiring? Can he assure the House that that will not happen in similar cases in future? Will he take this opportunity to deal with the concern of those families that what he is introducing today cannot be made retrospective?

Mr. Straw: As I said in my statement, I accept that the families and friends who lost loved ones at Hillsborough are right to be angry about the fact that disciplinary proceedings were avoided by an early retirement. That matter is made even worse because the regulation that exists today, and which I believe existed eight or nine years ago, gives police chiefs a discretion not to allow a retirement in such a case. Therefore, I am not changing the regulation: I am ensuring its rigorous enforcement.
My hon. Friend asked why I could not make the changes retrospective. It is a fundamental principle that new criminal or disciplinary proceedings cannot be imposed retrospectively. It would not stand up in a court here, where it would plainly be seen as an abuse of process; nor would it stand up in the European Court of Human Rights in Strasbourg.

Mr. Tim Boswell: Further to the exchanges about Hillsborough, and as the right hon. Gentleman made it clear that the start date is to be 1 April, will he clarify whether any new disciplinary cases opened after today, which relate to alleged offences that have either already taken place or that take place before the start date, will be covered under the old procedures for burden of proof?

Mr. Straw: I think that the hon. Gentleman may have misheard me. The start date is 1 April 1999, not 1998. There is a great deal of work to be done to ensure that the regulations are properly drafted. I wish that we could begin before that date, but we cannot. I will write to the hon. Gentleman in detail about the point at which the start date will come into operation. My anticipation is that it will operate from the point at which a disciplinary offence is committed.

Mr. John McDonnell (Hayes and Harrington): My right hon. Friend may be aware that I have tabled a number of questions about disciplinary procedures in each police authority, asking for information on the number, the duration, the cost and the outcome, including any early retirements by any officers involved. Is my right hon. Friend aware that there has been some concern about the number, the duration, the cost overall, and the lack of outcome from those inquiries? That is why I welcome the proposals that he has announced today.
Does my right hon. Friend accept that the number of police inquires are a direct reflection of a failure in management? What measures will be put in place to strengthen management within the police service to accompany the reforms?

Mr. Straw: I share my hon. Friend's concern about the lack of outcome in quite a number of the inquiries. They can be enormously disproportionately expensive, continue for years, tie up huge numbers of officers, and then produce no outcome. No one is satisfied with such a process.
The issue of management is a bit of a chicken and egg situation. Managers in the police service, from sergeants upwards, know that bad officers can plead a right of silence that is now far more comprehensive than that available to their criminal suspects. They also, rightly, have very good legal advice made available to them. Therefore, they can give the run-around to managers, especially those who may not be at the highest level. In some forces, that has led to a management retreat from taking on officers who are corrupt or who operate below the standards expected of them.
It is my hope and anticipation that these changes will strengthen the management of the police service at every level, and I certainly intend to ensure that that happens.

Mr. Nicholas Soames: In joining the Home Secretary in congratulating the Home Affairs Select Committee on its excellent report, may I ask him to draw to the attention of the Prime Minister and the Leader of the House this rare occasion on which a Select Committee report has been dealt with so promptly, to the added credibility of the Select Committee system and its importance in holding the Executive to account?
Will the right hon. Gentleman also explain how, given the fact that disciplinary hearings have rightly been held in private, matters will enter the public domain so that those who have made the complaint will know the results of that complaint?
Finally, will the regulations apply to the Ministry of Defence police as well?

Mr. Straw: I shall pass on the hon. Gentleman's point about Select Committee reports to my right hon. Friend the President of the Council. Meanwhile, I concur with his congratulations to the Select Committee and—if I may say so—I accept his congratulations to myself.
The hon. Gentleman asks how complainants will know what has happened to the complaint; as happens now, they will be written to. He also asks whether the public will be able to attend disciplinary hearings against police officers. That does not happen in any other employment cases, so I thought that it would be unacceptable to apply it to the police.
It is worth drawing to the attention of the House the fact—if I may repeat it—that the overwhelming majority of disciplinary cases, particularly those involving serious allegations against police officers, have not arisen as a result of a complaint either by a suspect or by members of the public: they have arisen as a result of internal investigations by the police. The hon. Gentleman asks whether the changes will apply to the Ministry of Defence police. No, they will not specifically apply to them, but I shall certainly draw his remarks to the attention of my right hon. Friend the Secretary of State for Defence.

Maria Eagle: I welcome my right hon. Friend's statement, but I think that he said that the police force involved in the Hillsborough tragedy could have required the senior officer responsible to undergo the disciplinary proceedings that he was finally spared by retiring on the ground of ill health. If my right hon. Friend encountered such a situation in future and felt that a senior officer had been let off the hook, what steps would he


take, or be able to take, to ensure that the senior managers of the force discharged their responsibility in carrying out disciplinary proceedings more fully?

Mr. Straw: I hope that, following the changes that I have announced today—they will come into force on 1 April next year—such a circumstance will not be able to arise. We are tightening up the regulations and imposing much clearer guidance, both on police authorities and on chief officers, about the operation of the disciplinary procedures.

Mr. John Wilkinson: I add my appreciation to that of other hon. Members of the Home Secretary's endorsement of the majority of the Select Committee's recommendations on the enhancements of police discipline and performance in the service.
In the concluding remarks of his statement, the right hon. Gentleman said that consent in policing depends on public confidence. Is he absolutely confident that, when the new police authority for London is established, the Commissioner of Police of the Metropolis will receive the full political backing that he will require to take on some of the tough cases of corruption that we know exist in the Metropolitan force? Currently, that backing is provided by the Home Secretary in person, who is answerable to the House of Commons.

Mr. Straw: I am quite sure that the police authority for London will give the Commissioner of the day full backing for the investigation of any complaints against individual police officers on disciplinary matters. The hon. Gentleman uses the phrase "full political backing". I make it clear to him that chief police officers have duties that are entirely separate from those of police authorities in disciplinary matters up to and including the rank of chief superintendent.
Chief officers across the country decide to initiate proceedings—or have them initiated—against members of their forces not on political grounds, but on the basis of the evidence that is put before them. I have no doubt whatever that that will continue to be the case in the Metropolitan police district.

Mr. David Winnick: Does my right hon. Friend recall that, in the past year, the Commissioner of Police of the Metropolis and the chief constable of the West Midlands both stated that they were unable to deal with dishonest and corrupt police officers under the present circumstances?
I welcome the announcement that my right hon. Friend has accepted a change in the disciplinary system. Does he agree that it will be welcomed not only by chief constables but by the vast majority of honest police officers—the very people he mentioned—who are ashamed of having in their ranks the small number of corrupt and dishonest officers who are rotten to the core, and that the sooner the bad ones go, the better it will be for the police, good order and the community as a whole?

Mr. Straw: My hon. Friend is quite right to draw to our attention the remarks of a number of senior chief officers who gave evidence to the Select Committee, including the current Commissioner of Police of the

Metropolis, Sir Paul Condon, who complained about the inadequacies of the present system. He said
The system must allow for the effective investigation and punishment of wrongdoers
within the police service.
My hon. Friend was also right to say that the changes will be welcomed by police officers of every rank. The issue reminds me of the situation with teachers: the people who suffer most from bad teachers are the overwhelming majority of good teachers. Those who suffer most, alongside the public, from bad police officers are the overwhelming majority of good police officers.

Mr. David Heath: I welcome the Home Secretary's statement. Does he recognise the role of police authorities in assuring, in the public interest, the probity and rigour of the complaints and disciplinary procedures? Will he consider the value as a tool of police management of assessing the pattern and number of complaints, whether substantiated or not, against individual officers or units of command?

Mr. Straw: I certainly recognise the importance of police authorities in ensuring that adequate procedures are established for dealing with discipline and complaints within their services. I acknowledge that the pattern and number of complaints may be an indicator of a police force's performance, but such figures should be used with care, because the number of complaints arising in a difficult-to-police inner-city area is always likely to be higher than in quieter, more rural areas, and that is no criticism of the police concerned.

Several hon. Members: rose—

Madam Speaker: Seven hon. Members are rising who have been doing so for a long time. If we can proceed without repetition and with a little speed, I should like to call them all.

Gillian Merron: I welcome my right hon. Friend's clear and pragmatic statement, and in particular his commitment to greater openness, which, as he will know, is a big issue in Lincolnshire. I discussed that issue at a recent meeting with him arising from the case of Inspector Dena Fleming, who alleged sex discrimination against her employers and was suspended for two years on disciplinary charges that were subsequently dropped, following a report by Humberside police that remains under wraps, and an industrial tribunal ruling of victimisation.
Will my right hon. Friend give me some assurances about the fast-track dismissal proposals, especially when victimisation is involved, as Inspector Fleming might have had more of a struggle to clear her name had the chief constable had the opportunity to dismiss her earlier?

Mr. Straw: I understand my hon. Friend's concerns. As she said, they have already been the subject of a meeting between us. The proposal for fast-track dismissals is not for the kind of case that she has in mind but for a situation in which a police officer has been caught red-handed committing a serious crime of dishonesty or corruption; the evidence against him or her is overwhelming; and it is in the public interest for that


officer to be removed from the service as quickly as possible. Even in those circumstances, the officer would have full legal representation, and there would be a proper right of appeal.

Mr. David Lock: Does my right hon. Friend agree that nothing saps the morale of police officers more than going through an investigation, giving evidence in court and finding that it is not accepted by the jury because of their lack of confidence in the police? Does he equally agree that, if police officers give evidence in court and it is not only not accepted but shown not to be correct, counsel, the Crown Prosecution Service and other officers ought to have a duty to ensure that disciplinary action is considered promptly and efficiently against the officer in such circumstances?

Mr. Straw: In the interests of brevity, the answer to both my hon. Friend's questions is yes.

Ms Jenny Jones: My right hon. Friend says that disciplinary hearings will not be heard in public. Therefore, who will have access to the written record of such proceedings?

Mr. Straw: The outcome of the proceedings would be made public to the complainant if there were one, and otherwise to the police authority. As I said, in the overwhelming majority of serious cases there is no public complainant, because the investigation has been prompted by internal police processes and not by a complaint from a member of the public.

Mrs. Louise Ellman: Is the Home Secretary aware that deep outrage persists over the Hillsborough tragedy, partly because officers were allowed to escape disciplinary procedures, despite the Police Complaints Authority's claim that they had neglected their duty? Can he offer any hope whatsoever that the officers concerned will have to face justice; and can he offer any other forum to enable parents to pursue their concerns?

Mr. Straw: As my hon. Friend knows, and as I have explained in her presence to parents and relatives of those who died at Hillsborough, with great regret, I cannot offer any comfort to those seeking a disciplinary process at this distance against officers alleged to have been responsible through negligence for what happened. It would be wrong of me to hold out that hope, because it cannot be fulfilled.
We want to ensure that such a circumstance does not happen again and that the Police Complaints Authority does not, as happened at Hillsborough, again recommend disciplinary action against officers who then retire through ill health and so escape any disciplinary process. That is wrong, and everyone knows it. I am trying to ensure that it does not happen again.

Fiona Mactaggart: May I welcome the speed of this response? If the same action had been taken following the speech by the right hon. and learned Member for Rushcliffe (Mr. Clarke) in 1993, how many officers would not have walked away without being the subject of disciplinary investigations?
On his suggestion about examining more independent inquiries, will my right hon. Friend consider whether it would be appropriate to establish an automatic system of independent inquiry into cases of members of the public who are shot dead by an armed policeman? One of the great strengths of this country is that our police are not armed. There are questions about how effective the PCA is in investigating such matters, and there is a case for inquiries to be automatic on such occasions.

Mr. Straw: On my hon. Friend's first question, when the right hon. and learned Member for Rushcliffe (Mr. Clarke) was Home Secretary, he proceeded with great vigour on the issue. Sadly, he was translated to Great George street as Chancellor of the Exchequer in May 1993, and then, as far as police discipline was concerned, the system went into reverse. I cannot say how many corrupt police officers escaped their just deserts as a result of the failure of my immediate predecessor to implement the recommendations of his predecessor, but some must have done so.
My hon. Friend also asks whether, under the PCA, there could be an automatic independent inquiry if someone was shot by the police. Such matters should not be subject to a system that is wholly separate from the other procedures that we are establishing.
At the moment, if a death appears to have been caused by police action—however justified that action—the PCA automatically launches an inquiry. By definition, at the moment that investigation is undertaken by a police force, but by a different police force. Any changes should wait on general changes to the system and the introduction more generally of an independent element for investigations.

Mr. Ross Cranston: As a member of the Home Affairs Select Committee, may I, too, warmly welcome my right hon. Friend's statement? Is not the answer to the point about the standard of proof raised by Conservative Members that the civil standard operates in other comparable jurisdictions and for other professional bodies perfectly satisfactorily?

Mr. Straw: The answer is yes.

Mr. Derek Twigg: I thank my right hon. Friend for keeping his promise to the Hillsborough families by making these proposals. I know that he has met them, and has been closely involved.
I am concerned that, while the officer involved, Chief Superintendent Duckenfield, was thought unfit to be able to carry on, the families had to go through independent inquiries, mini-inquests, inquests and further emotional, difficult time—and they are still fighting. That is an ironic comparison.
Given that disciplinary proceedings were at one time contemplated, I am worried about the behaviour of the South Yorkshire force. Disinformation and propaganda were used to try to defend the police officers in charge. That was not helpful in respect of subsequent disciplinary proceedings. In considering the detail of his proposals, will the Home Secretary examine how police forces react to high-profile disciplinary cases?

Mr. Straw: I thank my hon. Friend for his first remarks. There is no doubt that the families are right to


feel a strong sense of injustice about the failure of the system to secure disciplinary process against those who appear to have been responsible, through their negligence, for the dreadful disaster at Hillsborough so many years ago.
On the more general point about the behaviour of forces, the way in which some in the South Yorkshire police tried, quite wrongly, to minimise what had happened was a very unedifying saga, to say the least. In the words of Lord Justice Stuart-Smith, some, including Chief Superintendent Duckenfield, uttered "disgraceful lies" about who was responsible, in order to evade their own responsibility.
I cannot say that such circumstances will never happen again, but I can say that there has been a profound change in the culture and attitude of the police service since Hillsborough. I believe strongly that my announcement today will reinforce that change, and ensure much higher standards should such a disaster happen again.

Statements by Ministers

Mr. Nicholas Soames: On a point of order, Madam Speaker, relating to a question that I asked the Leader of the House last Thursday. Given that there was a Government statement last Thursday on the expenditure of £45 million on replacing outdoor lavatories for children, could you impress on the Government the importance of Ministers coming to the House when they have important news to impart?
You will be aware that the Foreign Secretary has returned from arguably the most important trip of his presidency of the European Union Council of Ministers, which touched on matters vital to this country. I and many other Conservative Members believe that he handled it extraordinarily well. Given that comparison, is it not right that he should come to the House and make a statement on what happened?

Madam Speaker: I take very seriously the hon. Gentleman's point of order. I know that a number of statements are forthcoming this week. Perhaps we shall hear from the Foreign Secretary, but I do not know yet. I will do what I can.

Concessionary Television Licence (Amendment)

Mr. John Swinney: I beg to move,
That leave be given to bring in a Bill to create greater flexibility in the definition of sheltered housing that is eligible for concessionary television licences, to reflect developments within the structure and management of sheltered housing.
I am pleased to have the opportunity to propose this Bill, which is designed to deal with some of the anomalies inherent in existing legislation on granting concessionary television licences to areas of sheltered housing. The issue came to my attention as a result of constituency cases where sheltered housing complexes have found it difficult to secure concessionary television licences.
The sages of the House will have a wry smile at a new boy discovering an issue that he considers a gold mine of anomalies, only to discover that he is not the first to arrive at the treasure. As I looked further into this issue, I discovered that many hon. Members had raised it before. I pay tribute to those hon. Members who have asked questions, led debates in the House and written letters to Ministers on the subject. I noticed from Hansard extracts that you, Mr. Deputy Speaker, were involved in pursuing the previous Government on this matter.
I am grateful to those hon. Members who have pioneered the issue and who have agreed to support my Bill. I am delighted that it has attracted cross-party support, especially from several of the supporters of a recent early-day motion, led by the hon. and learned Member for Orkney and Shetland (Mr. Wallace).
Current regulations stipulate that four qualifying criteria must be satisfied to ensure that a sheltered housing development can successfully apply for a concessionary television licence. First, sheltered housing must form part of a group of at least four dwellings within a common and exclusive boundary, with a concession that up to 25 per cent. of units in a scheme can be properties purchased under the right-to-buy legislation. Secondly, the accommodation must be specially provided for occupation only by disabled people or retired people of pensionable age. Thirdly, the units must be provided or managed by a local authority, a housing association, or a development corporation. Fourthly, the accommodation must have a person—for example, a warden—whose function is to care for the needs of the residents and who lives on site, or works there for at least 30 hours each week.
At one time, those regulations would have been an accurate reflection of the nature and characteristics of sheltered housing—that is, blocks of housing units constructed by local councils and with a resident warden living in a flat within the complex—but the world has moved on, and the regulations appear to relate to a very structured type of sheltered housing complex. Indeed, within the origins of the concessionary television licence scheme was a desire to ensure that sheltered housing benefited from a concession that was available to residential homes. The four criteria I mentioned bear a greater resemblance to the characteristics of a residential home than to sheltered housing as we know it today.
The criteria do not relate to the increasingly varied characteristics of sheltered housing complexes. As the right-to-buy legislation came into force in the 1980s, it


became almost impossible for local authorities to justify the construction of new family-style accommodation. Limitations were therefore placed on local authorities, and they increasingly concentrated what housing development work they undertook on the construction of sheltered housing. To their work was added the contribution of a plethora of other housing associations, which came forward with a number of innovative schemes to provide that type of housing.
Some smaller units were constructed as part of a wider housing development. Care for elderly residents is provided not by a resident warden, but by giving residents security through providing them with, for example, an alarm system linked to a communications network. If the elderly resident requires assistance at any time during the day or night, he or she simply rings the alarm, and help is at the end of the telephone. Help can be sent via mobile assistance units targeted at the needs of individual residents.
I visited the headquarters of such a system at Fairlie house in Kirriemuir in my constituency. It is or can be in contact with thousands of pensioners in sheltered housing throughout the county of Angus, and help is on hand all the time. It is an efficient and comforting method of giving security to fiercely independent elderly people. However, that system would lead to a range of sheltered housing complexes in my constituency failing the test of the four criteria, because the complex would not involve a resident warden, despite the fact that the care support and the type of protection available to the elderly residents are not really that different.
Early-day motion 930 raises the problem that concessionary television licences can be withdrawn because of circumstances over which the individual resident has absolutely no control. In the current climate of local authority financial constraints, which inevitably lead to cuts, there is an increasing trend for wardens to be removed from residential accommodation or to work fewer hours.
Such a change in practice, effected by the local authority, will result in one of the four criteria not being fulfilled, and the concessionary television licence being forfeited. In such a case, the individual's circumstances have changed not one iota, but the arrangements of the sheltered housing complex have changed as a result of the local authority's action. There appears to be no flexibility in the system to take account of such difficulties.
I am aware that many Members have constituency cases related to the issues raised in the Bill, and I am grateful to a number of them for calling me in the past few days to discuss the cases that they have in mind. One case in my constituency—I have discussed it with the Television Licensing Authority—relates to Priory cottages in the village of Lunanhead in Angus, a sheltered housing complex separated from a larger complex at Carseview terrace. The two units share support services, but are not physically linked, being separated by a few other houses. Carseview terrace receives a concessionary licence, but Priory cottages does not; one complex passes all four criteria, but the other does not.
My Bill aims to modify the strict nature of these criteria and to define a more flexible set of criteria that can be applied, for the benefit of the residents and the organisations that care for them. At the very least, the criteria must be revised to make them more representative of sheltered housing patterns; and the absolute requirement that all four criteria must be satisfied should be modified.
The Government have said that they intend to revisit the concessionary television licence as part of the funding review of the BBC that will be concluded in advance of 2002.I welcome that commitment to a far-ranging review, but I believe that the Government must be encouraged to deal with some of the anomalies so as to make the application of these provisions more practical. If the Bill is not successful, I hope that the Government will look at the substantial proposals that emerge, and consider them as the review gathers pace.
I hope that my Bill will be successful in providing additional support and continuity for elderly and disabled people. The system is not working at present, and it should be simplified to expand assistance to these key groups in society. I commend the Bill to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. John Swinney, Mrs. Margaret Ewing, Mr. Dafydd Wigley, Mr. James Wallace, Mr. Huw Edwards, Mr. Peter Bottomley, Rev. Martin Smyth, Mr. Paul Keetch and Mr. Alasdair Morgan.

CONCESSIONARY TELEVISION LICENCE (AMENDMENT)

Mr. John Swinney accordingly presented a Bill to create greater flexibility in the definition of sheltered housing that is eligible for concessionary television licences, to reflect developments within the structure and management of sheltered housing: And the same was read the First time; and ordered to be read a Second time on Friday 24 April, and to be printed [Bill 155].

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [17 March].

Orders of the Day — AMENDMENT OF THE LAW

Motion made, and Question proposed,

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for varying any rate at which that tax is at any time chargeable; or
(d) for any relief, other than a relief which—

(i) so far as it is applicable to goods, applies to goods of every description, and
(ii) so far as it is applicable to services, applies to services of every description.—[Mr. Gordon Brown.]

Question again proposed.

Orders of the Day — Budget Resolutions and Economic Situation

[Relevant documents: The Third Report of Session 1997–98 from the Social Security Committee, on Tax and Benefits: Pre-Budget Report (HC 423), and the First Report of Session 1997–98 from the Environmental Audit Committee, on the Pre-Budget Report (HC 547).]

The President of the Board of Trade and Secretary of State for Trade and Industry (Mrs. Margaret Beckett): It is both a great pleasure and an honour to open the final day of debate on this, the first full Budget of the new Labour Government: a Budget that starts to shape our future; a Budget that is radical and reforming. It begins to heal the divisions in our society and to tackle the weaknesses in our economy—a bold Budget from a Government who, I remind the House, have held office for less than a year.
We came to office pledged to promote economic stability and sound economic management, to restore our public finances and to repair our damaged and divided country. This Budget makes further progress on all those aims. The announcement of a long-term framework for business taxation, following the steps last July to place interest rates in the hands of the Bank of England, contributes to the economic and policy stability that helps British business to plan ahead and which business called on us, when we were in opposition, to promote should we become the Government.
As we have been in office for less than a year, we must remind ourselves and the country of what led the business community to make that universal and heartfelt plea. I refer of course to the economic legacy of the Tory party. Business failures reached all-time highs; more than 24,000 businesses went bust in 1992 alone. Manufacturing investment was at an all-time low. For the first time ever,

we had a manufacturing trade deficit. Interest rates soared to a peak of 15 per cent., and inflation was in double figures. Hundreds of thousands of homes were repossessed, and millions were condemned to a lifetime of hopeless unemployment.
What about the public finances? National debt doubled under the Government led by the right hon. Member for Huntingdon (Mr. Major), with interest alone costing income tax payers about £1,000 a year. This was the burden that we were all forced to carry because of the sheer incompetence of that Tory Administration. When we came to power, the Tories were spending far more repaying the interest on their debts—the cost of their failure—than they were investing in our schools.
All week, the Conservatives have been boasting of what they claim is our golden legacy—but what about their golden dowry? They ran up all these debts despite having the full benefit of the biggest windfall gain in our long history. To them and them alone fell the full bounty of North sea oil—£139 billion at today's prices. That was on top of income from privatisations that yielded further billions for the Exchequer. From those two sources alone, the Conservative party had well in excess of £200 billion at today's prices—approaching £30 million every single day for 18 years. What should have been a great opportunity to invest in all our futures and prepare for the next century was instead frittered away on incompetence and dogma.
So much for the idea that the Tories are the party that knows how to run a tight ship. One would think that they would learn from their mistakes—to say nothing of the verdict of the British people on those mistakes—but the same blithe indifference and ignorance still apply. The same rhetoric is deployed about the wickedness of the minimum wage or the social chapter, as if the British people had rejected, not endorsed, those policies.
The same sleight of hand is displayed in the Tory pretence that we are breaching policy promises which in fact exist only in the fevered imaginations of Conservative Members. In this vein, the Leader of the Opposition claimed to be quoting me when I was attacking certain Tory proposals in 1988 as being the same as the measures in this Budget—when almost the only thing they have in common is the use of the word "credit".

Mr. John Redwood: Does the right hon. Lady think that DM3.06 to the pound is a good rate for British industry? Does she fear that it will mean big reductions in exports, a big surge in imports and a lot of factory closures?

Mrs. Beckett: I am glad that the right hon. Gentleman raised that matter. I shall come to interest rates and the exchange rate later on. I am looking forward today to hearing from the right hon. Gentleman what the Conservative party proposes that the Government should do—

Mr. Redwood: indicated assent.

Mrs. Beckett: I am very pleased to see that. We hope to hear a great deal from the right hon. Gentleman about the policies that his party now supports—because there have been some abrupt and rather surprising changes. When we introduced the competition and spectrum


pricing Bills, the right hon. Gentleman attacked policies that his party had broadly supported before the election. That must have come as a surprise to the Leader of the Opposition. Before I had even begun discussions with Jaguar over Government support for a new project, the right hon. Gentleman put the jobs of thousands in Halewood at risk by attempting a crass bit of interference in the negotiations. That, too, was rather awkward for the Leader of the Opposition.
Then there was the debacle over Chancellor Kohl, which would be almost hysterical were it not so serious. A senior member of Her Majesty's Opposition managed to insult both the City of London and the Chancellor of Germany, one of Britain's most important trading partners, in one fell swoop. This time, the Leader of the Opposition had had enough and hauled the right hon. Gentleman publicly over the coals—sorry about the pun. Now there seems to be a public tug of war about economic and monetary union, and whether policy on it will or will not be softened.
Today, in a fascinating article in The Times—it reads a little as if written by Conservative central office, as if preparing the ground for a policy U-turn—the right hon. Gentleman does at last observe that there will be a cost to staying out of EMU. He says that, when dealing with continental companies,
The British company has to take the exchange rate risk as the pound will continue to fluctuate against the euro".
As I understand it, the right hon. Gentleman will have our companies facing that type of cost for ever, on principle, which does not seem to be in the interests of British business.
The article says:
The compulsory introduction of the euro in some European countries may change some business views of the balance of advantages and disadvantages of a European currency".
I hope that the right hon. Gentleman intends during his remarks to explain whether, as it appears, his position on that is changing.
While the Opposition are ditching many of the policies on which they fought the most recent general election, we in government are working to deliver on our proposals, despite, not with the benefit of, their legacy. Make no mistake: whatever they say now, and however glowingly they paint the picture, we inherited what was, in many ways, a shambles. We inherited a health service burdened by bureaucracy while struggling to care for the sick, an education system that was failing our children, and an economy with fresh inflationary pressures after years of opportunistic manipulation for short-term political advantage.
When one inherits a mess, it takes time to sort it out, especially after 18 years; but from day one, the Government have been delivering on our promises. We are delivering a new deal for young people, funded by the tax on the windfall gains of the privatised utilities, opposed by both the largest Opposition parties. That new deal is up and running already in pathfinder projects, and will go nationwide before our first year in office is over.
A Low Pay Commission was established, and had its first meeting within 100 days of our taking office. The National Minimum Wage Bill is already through the House of Commons, and the wage should be in place next year.
We are providing more resources for health and education; we have provided £3.8 billion already.
Ours is an impressive record of delivery on our pledges. Moreover, let us not forget that not one bit of it would have been done by the Conservative party or by those on its Back or Front Benches. Now we have—

Mr. Ian Bruce: rose—

Mr. Deputy Speaker (Mr. Michael Lord): Order. Someone has an electrical device that is going off. I am sure that hon. Members are aware that Madam Speaker takes a very dim view of that.

Mr. Bruce: As the Low Pay Commission met so quickly and no doubt will have to come up with a rate every year, will the right hon. Lady tell us what rate she expects for the minimum wage—not least because it has an impact on the Chancellor's Budget?

Mrs. Beckett: No, I am not prepared to speculate about what the recommendations of the Low Pay Commission will be. We set it up as an independent body to do its own research and come to a view and make recommendations, and those recommendations will be before the House and the right hon. Member for Wokingham (Mr. Redwood) in the not too distant future.
In this Budget, building on the one delivered in July 1997, we are taking the implementation of our pledges further forward for families, for the health service and education, and for the economy.

Mr. Nick Gibb: Will the right hon. Lady give way?

Mrs. Beckett: I shall continue a little further if I may.
This is a Budget for the long term. It moves us still further from that legacy of short-termism, boom and bust and under-investment. Under the previous Administration, Britain's record of economic instability was one of the worst among the G7 countries. Under the previous Government, Britain suffered the two deepest and longest recessions since the war, separated only by an unsustainable boom. How could industry take a long-term decision when it did not know what to expect from week to week? We are creating a macro-economic framework for long-term stability and investment, giving our companies, at long last, the opportunity to thrive.
We are not only giving the Bank of England a key role in controlling inflation, but working to follow the golden rule that Government borrow only to invest over the economic cycle—a principle of sound public finances that the Tories never even had the vision to contemplate. Moreover, we have launched the code for fiscal stability, which will be given statutory basis in the Finance Bill. That code sets out the requirement for an open, transparent and accountable approach to managing the public finances, which will ensure that fiscal policy continues to be set in Britain's long-term interests.
We have sought to promote stability in tax policy, too.

Mr. Gibb: Am I right in thinking that, in opposition, Labour pledged not to raise taxes when it was elected— and has it now breached that pledge in both Budgets?

Mrs. Beckett: No. We did not give the pledge to which the hon. Gentleman refers. We said very specifically that


we would not raise—[Interruption.] Yes, I have read the record. I am very well aware of what we said, and I have no illusion about what it was. We were very clear and careful in what we said and what we promised. We promised not to raise either the standard rate or the higher rate of income tax. We promised to cut VAT on fuel, as we have done, and we promised—

Mr. Gibb: Backtracking.

Mrs. Beckett: No. We were most careful to say on all occasions that of course no Government could rule out making other changes, in various tax allowances and so on. We were determined not to repeat the crass errors of the Conservative party in telling the British people a pack of lies and then complaining when they came home to roost.

Mr. David Ruffley: Why is it that, on 20 January 1997, the present Chancellor of the Exchequer said on "Newsnight":
It is my aim to get the burden down for ordinary people",
yet he has increased taxes across the board, which impacts directly and indirectly on such ordinary people? What is the right hon. Lady's answer to that?

Mrs. Beckett: I could not quite hear all of the end of the hon. Gentleman's remarks, but I can say to him that, as he pointed out, my right hon. Friend the Chancellor made it clear that he wanted to make people on low incomes better off, and that is precisely what we are already doing in this Budget.

Mr. John Bercow: Is the right hon. Lady saying that the statement by the then Leader of the Opposition, reported on 21 September 1996 in the Financial Times, that
We have no plans to increase tax at all",
is untrue? Is she saying that the Financial Times has given credence to an untruth?

Mrs. Beckett: My right hon. Friend was being asked about personal taxation. Of course—[Interruption.] What we said about tax before the general election was clear, and the British people completely understood it. We made it absolutely clear that we would not change the rates of income tax. We also made it clear that we would have a windfall tax on the privatised utilities. We made it plain that we would cut VAT on fuel.

Mr. Bercow: Burden.

Mrs. Beckett: No one believes any of this nonsense from the Conservative party, for the simple reason—

Mr. Ruffley: Try reading the facts.

Mrs. Beckett: Yes, I am looking at the facts. No one believes what the Conservatives say, for the simple reason that what they say now about our proposals is as inaccurate as what they said about their own before the 1992 general election.
We have sought to promote stability in tax policy, too. We undertook a major review—

Mr. John Butterfill: Will the right hon. Lady give way?

Mrs. Beckett: I am sorry; I have finished with that point.
We undertook a major review of company taxation and have already introduced reforms that remove the disincentive to invest for the future—the implicit incentive, instead, to pay dividends. By abolishing advance corporation tax, we have simplified company taxes and removed the distortions that affected our international companies.
We have heeded the comments of the business community and excluded all small and medium-sized companies—those with profits below £1.5 million—from the obligation to pay corporation tax by instalments. The main rate of corporation tax will be 30 per cent. and there will be a small companies rate of 20 per cent. Those are the lowest rates since the tax was introduced in 1965— 3 per cent. lower than they were under the Conservative party, and with the lowest main rate of any major country. Once the package is fully in place—

Mr. Redwood: To clarify matters for the House, can the right hon. Lady confirm that the Red Books for this and the previous Budget make it clear that, during this Parliament, there will be an increase in business taxation, including utilities tax, of £25,000 million? That is the Treasury figure. Can she confirm it?

Mr. Bercow: Tell her, Gordon.

Mrs. Beckett: I am not familiar with the final figure that the right hon. Gentleman gives, but I am well aware that we are proposing a package of changes in corporate taxation. That package of changes, as I am sure the right hon. Gentleman is well aware—[Interruption.] Ah; the right hon. Gentleman is including the windfall tax; that is why the figure that he gives is different from that given by most others. All I can say to the right hon. Gentleman is that we are indeed introducing a full package of changes in corporate taxation, which will make the tax system simpler and more stable, and which will encourage investment and long-term development. That is what the Government wish to achieve.
As I said, once the package is fully in place, companies will pay £1.5 billion a year less in tax. Overall, the reform of corporate taxation in this Budget is worth £9 billion to business in present value terms. We have given a commitment not to increase corporation tax rates for the lifetime of this Parliament. That is all excellent news for businesses, and it was welcomed by them. Jeremy Peat of the Royal Bank of Scotland said:
The promise of a stable corporation tax framework and lower tax rates and enhanced reliefs for small and medium-sized companies … are all moves in the right direction.
With the low rates of tax that we shall have in place from April 1999, a business with profits of £500,000 a year will pay £15,000 less in corporation tax than it paid under the previous Government.
Small and medium-sized enterprises that pay dividends will gain a cash-flow advantage of about £1 billion from the abolition of ACT. Small firms will also benefit from


accelerated capital allowances for at least another year. As a result, they will pay £300 million less in tax in 1999–2000 and 2000–01. For a typical small company investing about £100,000 in the coming financial year, that will mean £3,150 less in tax for that year.
Because this is a Budget for entrepreneurs, more people with great ideas for business opportunities will be able to turn those ideas into action. Capital gains tax will now encourage investment and enterprise, with a new effective rate of 10 per cent. or less on long-term gains on business assets. Important changes to the enterprise investment scheme and capital gains tax reinvestment relief will stimulate the provision of equity finance for smaller, higher-risk trading companies. That is an important set of fiscal changes for small firms, but we have done more.
For many small firms, the administration associated with paying tax can be very costly. That is why we have announced a new payroll assistance scheme provided by the Inland Revenue and the Contributions Agency. The service will provide one-to-one help for new employers getting to grips with tax, national insurance and benefits. By making it easier and cheaper for small businesses to take on their first employee, it will reduce one of the major barriers to setting up and running a business. It is a straightforward, practical change that should have been made long ago, but the previous Government—who claimed so loudly to be the champion of small business— failed to act in this instance, as in so many other instances.

Mr. Bercow: I am most grateful to the Minister for her courtesy in giving way. Will she take this opportunity to confirm to the House that small companies, many of which are technology or knowledge-based and employ highly paid staff, will face a bigger national insurance burden as a result of this Budget—yes or no?

Mrs. Beckett: Overall, small businesses will benefit from this Budget—as I am sure the hon. Gentleman is perfectly well aware. The changes that my right hon. Friend the Chancellor has made to national insurance contributions alongside the changes to corporation tax and all the other issues to which I have referred will mean a benefit to small business. That is why small businesses have welcomed the Budget—and obviously the hon. Gentleman wishes that they had not.
Small and medium-sized enterprises are the bedrock of the future growth in jobs and investment upon which we, as a nation, depend. A vibrant SME sector is quite simply vital to the future competitiveness of Britain, and tax changes and simplified regulation can help to promote enterprise.

Mr. Malcolm Bruce: The Minister is making a very good point about the need to encourage small and medium-sized businesses. Does she acknowledge that, although the operators in the North sea are large multinational companies, many businesses that supply and service those industries are small and medium-sized? Does she agree that an adverse change in the regime when oil prices are at an all-time low could threaten both the home market and export opportunities for those businesses?

Mrs. Beckett: Those small businesses, like others, will benefit from the overall package in the Budget. The hon.

Gentleman makes a different point about the review of taxation in the North sea. He is well aware that my right hon. Friend is continuing to examine that matter. My right hon. Friend has heard the hon. Gentleman, and we shall have his observations at the back of our minds when we consider the overall regime for the North sea.

Mr. Ian Bruce: rose—

Mrs. Beckett: I have given way once to the hon. Gentleman and I am beginning to be concerned about time. If he does not mind, I shall make a little more progress.
Those changes are only part of our aim to create a more entrepreneurial culture—a culture in which those who succeed in enterprise are praised and where failure does not stop people trying again. Risk taking, innovation and taking a long-term view are crucial elements of a successful economy today, and we want to encourage them. The tax measures and the initiatives to support entrepreneurs will help to create a more enterprising Britain. Other actions that we have taken in my Department—from the new Competition Bill, to a major review of corporate governance and company law, to an important shake-up of the foresight process—are part of our drive to foster an innovative economy.
This Budget, too, will support innovation and research and development. It is increasingly recognised in the business community that innovation must be a continual process, taking place throughout the economy and involving every business and every employee. All types of innovative activities have a role to play, but there is an increasing premium on the successful exploitation of new technology—something that the previous Government either did not understand or did not seem to care about.
Again, the previous Government's legacy speaks for itself. Total expenditure on research and development as a proportion of gross domestic product has fallen to below 2 per cent. for the first time in many years. The United Kingdom now ranks fifth among the G7 countries in terms of total business enterprise R and D, down from third in 1981. The latest figures released yesterday suggest that, in 1996, civil R and D spending fell as a proportion of GDP. Our R and D scoreboard shows that larger United Kingdom firms spend significantly less on R and D than their overseas counterparts. Fewer than half of all manufacturing SMEs employ qualified scientists and engineers.
The Government are determined to improve Britain's investment in research and development—of course, that is not exactly the same as innovation, but it is an important component. The framework that we have put in place to promote stability and long-termism is the seedbed upon which innovation can bloom. With the Budget papers, my right hon. Friend the Chancellor and I have launched a national consultation—in a document entitled "Innovating for the Future—Investing in R&D"—on how we can improve our R and D performance.
It will be a wide-ranging review. It will cover all aspects of the business environment that affect R and D, including sources of finance, the accounting treatment of intangible assets, the rules protecting intellectual property, how management affects firms' propensity to innovate, and access to technology. We must examine what other countries are doing in areas such as tax incentives for


R and D, to see whether we can apply any lessons here. We also want to ensure that our review reflects the views of business, investors, employees and outside experts, so we have announced a consultation period lasting until the end of June 1998. The results of that consultation will influence the competitiveness White Paper that I plan to publish in the autumn, as well as the preparations for the next Budget.
Our commitment to R and D and innovation also lies behind the announcement of a new university challenge fund to encourage the commercial exploitation of university research. Under that scheme—which will create £50 million in venture capital—universities will be able to compete for funding provided by the Government in partnership with the Wellcome Trust and the Gatsby Trust. Challenge winners will be expected to lever in additional funds in partnership with the private sector. The Government are also considering several other initiatives designed to promote smaller high-tech businesses, where some of the most exciting and productive R and D is carried out. For example, we are consulting on ways of attracting experienced managers to small firms through equity-based remuneration schemes. We are determined to improve the United Kingdom's performance, and this Budget marks the start.
This is a Budget for business—all business. However, when looking at the climate for British business today, we cannot and do not overlook the fact that the level of sterling—particularly against the major continental currencies—is causing difficulty and concern for some companies. Sterling has of course appreciated by much less against the dollar, so with whom one trades and in what currencies matters a great deal.
We must look at the steps taken by other countries that have faced similar problems in the past. For example, the Germans and the Japanese sought competitiveness through a drive for quality and through the pursuit of less price-sensitive markets. Those approaches lie in the hands of business, although the drive to compete on quality, high standards and high added value is part of what sharply distinguishes this Government's approach to competitiveness from the sweatshop mentality of our predecessors. Those same predecessors, now the Opposition, complain continually that there must be further action that the Government can take, and call on us to take it.
Let me at once remind the House that this Government's aim is to have a stable but competitive exchange rate. My right hon. Friend the Chancellor made it plain in his Budget speech that he understands and shares the anxieties, in particular, of exporters.
What are the steps that the Opposition are calling on the Government to take? They complain that placing interest rates in the hands of the Bank of England means that the Chancellor himself no longer decides their level. Are they planning to reverse that step—even though it has led to a drop in long-term interest rates? A comment by the right hon. Member for Wokingham in an article this weekend suggested that he did indeed think that that step should be reversed. I hope that he will tell us whether that is the case.

Mr. Howard Flight: rose—

Mrs. Beckett: The hon. Gentleman will have to forgive me. I am interested in knowing the policies of right hon. and hon. Members on his Front Bench.
The present level of interest rates—one of the factors that will influence the exchange rate—is itself a direct result of the Conservatives' politically driven refusal to put up interest rates to tackle inflationary pressures just before the general election. The Opposition's present stance suggests that they would again take Britain on the roller-coaster of boom and bust that cost so many jobs and homes in the 1980s and early 1990s.
How else could we ease pressure on the exchange rate? Classically, by fiscal means. That means either a tight rein on public expenditure or higher taxes, or a mixture of the two. We have a tight rein on public spending—a very tight rein. Both in July and last week the Chancellor tightened the fiscal stance, and he does not believe that it needs to be tightened further.

Mr. Butterfill: Does the right hon. Lady accept that although the fiscal stance has been tightened a little, the tightening in the previous Budget was completely wrongly targeted, in that it attacked savings rather than attacking expenditure by the public? That is the reason for the present state of the economy.

Mrs. Beckett: No, my right hon. Friend did not attack savings, either in his previous Budget or in this one. As for an inadequate tightening of the public finances, I think that 2 per cent. of GDP is an extremely adequate tightening of the public finances.
If the Opposition think that the fiscal stance with regard to public expenditure should be tightened more, as the hon. Gentleman has just implied, that presumably means that they oppose the extra priority that we have given to health and education, the release of capital receipts for house building and repair, the new involvement in transport, the help to pensioners for heating bills and the help for families.

Mr. Butterfill: indicated dissent.

Mrs. Beckett: The hon. Gentleman shakes his head. Although he says that we should be doing more to tighten the fiscal stance, when it comes to saying what we should not be doing, he is silent.
What about taxes? The Opposition have made many claims that we are increasing tax on business, but they oppose all those taxes, so what are they calling for— higher VAT? We know that they wanted 17.5 per cent. VAT on fuel, and were embarrassingly defeated following a revolt among their own Back Benchers, among others.
The shadow Secretary of State, the right hon. Member for Wokingham, wrote in an article in The Birmingham Post on 20 March that we had
an overheating consumer side of the economy… Labour talk about 'hard choices', but they don't make them.
I look forward to hearing from the right hon. Gentleman how he proposes that pressure on consumption should be tightened.
Are the Conservatives seeking higher personal taxation, or just less for education, health, welfare or transport? It is hard to avoid the conclusion that they are in opposition just as they were in government—incompetent, short-sighted and irresponsible. Neither their policies nor their numbers added up then, and they clearly do not now.

Mr. Kenneth Clarke: The right hon. Lady says that we were politically irresponsible. Our measures


are producing an inflation rate of 2.6 per cent. She says of the present strong exchange rate that it is entirely a matter for the Governor of the Bank of England, but does she not accept that the exchange rate will not begin to ease until the markets expect that the next movement of interest rates will be downwards? Does she further accept that the narrative that she has just given explains why the Chancellor's fiscal policy will do absolutely nothing to create the climate in which that movement might begin? The Chancellor has raised taxes on business and on savings, and he has done so for populist reasons, because as she has just revealed, the Government think that short-term political reasons rule out taking any other step.

Mrs. Beckett: For the right hon. and learned Gentleman to complain about people taking decisions for short-term political reasons is truly a case of the pot attempting to call the kettle black. Everything that he has said about the present position in the economy is certainly not due to the inheritance that he left us, which left the country in a position of some instability. My right hon. Friend is taking steps to redress that, and those steps will, I believe, work in the longer term.
By promoting stability and enterprise, the Budget helps to underpin the three pillars upon which our future competitiveness is based: strong markets, modern companies and an enterprising nation. Open and fair markets are good for business as well as for the consumer. Bad regulation should not hold them back. The Budget cuts the burden of red tape on large and small firms, freeing them to compete and to prosper.
By simplifying tax, reducing compliance costs and recognising the importance of R and D and innovation, the Budget works to build a framework in which innovative modern companies can emerge. It is an important step to creating an enterprising nation that encourages entrepreneurs, backs good ideas and is alive to the opportunities of the future.
It is also a Budget built on partnership. An important element in that partnership is that we have a Budget combining fairness with economic efficiency, a Budget that is alive to business needs and to the new challenges and opportunities that business faces. That is how it has been received.
Dr. Andrew Sentence of BA called the Budget "cautious and responsible." The British Chambers of Commerce said that it was
a valuable Budget for enterprise and employment.
Even Tim Congdon of Lombard Street Research said:
On balance this is an impressive Budget. If the Chancellor continues in this mode, Britain will have a strong economy in the early years of the next century.
Above all, it is a Budget for a new nation—a new Britain. It delivers a great deal for those out of work, and it moves us to a position where work pays. Taken together with the minimum wage, it will transform the prospects for many families in or at present out of work. It transforms the prospects of mothers who have not been able to work because of the lack of affordable child care; they will have increased opportunities to take work.
The Budget makes it easier—and cheaper—for firms to take on more employees, especially for smaller firms. The improvements to national insurance will be a great boost to them.

Mr. Gibb: rose—

Mrs. Beckett: I am sorry—I am almost finished.
As the Forum of Private Business commented:
Cutting the cost through cutting employers national insurance on the lowest paid workers is a good way of encouraging small firms to take people on.
This Budget is ambitious because we are ambitious for Britain. It had a widespread welcome. The Confederation of British Industry welcomed it, saying that it was
encouraged by the overall fiscal balance and the prudent approach to public spending together with the continued control of public borrowing.
However, there was one endorsement that I found particularly interesting. I thought that in view of the keen interest of the right hon. Member for Wokingham in all things German, he might like to be reminded of some of the comments of the German press.
Bild Zeitung, the largest-circulation paper in Europe, in an editorial on the UK Budget headed "Great!", commented:
Britain was in the lead when industrialisation began. Germany took a hundred years to catch up. Now the British are dashing away again.
Handelsblatt described it as a "complete success".
A good press is always nice, but what matters is not what newspapers or pundits say a few days after a Budget. It is whether our strategy improves Britain's competitiveness in the long term that really counts, and whether we use the fruits of that success to build a fairer and better country.
This is a Budget for a new nation—a nation that fosters ambition and enterprise at the same time as valuing fairness; a nation that is as innovating as it is caring; a nation where each of us works for the good of all. It is a Budget to stimulate and support all who are ambitious for our country and ambitious for themselves and their families. It is the Budget that Britain needs.

Mr. John Redwood: New speech writer, new Labour, but I think that we need a change of script. Three deutschmarks six pfennigs to the pound; that is the truth today as we meet to debate the plight of manufacturing industry. The Chancellor's policy is hurting, but it certainly is not working. Week by week, we see imports up, sterling up and consumer spending up. Week by week, we see exports down, manufacturing output down and savings down. That is the very opposite of what the Chancellor sought when he was in opposition, full of good ideas but with no responsibilities.
The Chancellor's forecast shows us that there will be much more of the same gloomy outturn. He states in his Red Book that, over the year ahead, imports will surge; I fear that the right hon. Gentleman is right. He tells us that exports will come under pressure; again, I fear that he is right. He says that manufacturing industry will come under severe pressure from a strong pound; he is


undoubtedly right. The right hon. Gentleman tells us that savings will fall and that consumer spending will continue to increase.
What does the President of the Board of Trade and Secretary of State for Trade and Industry tell us about all this? She says that business should be grateful because there is a long-term framework for business taxation. Well, business has stability in the plans for ever-higher business taxes. I see no reason for gratitude when business will have to pay so much more over the next three years of this Labour Government.
The right hon. Lady then tells us that we should feel grateful because there is a long-term framework for monetary policy and sterling. That, she says, is bringing stability. The stability which it is bringing so far is that day by day, week by week, the value of sterling goes up against the currencies of some of our major competitors on the continent, making it extremely difficult—ever more difficult—for exporters. The right hon. Lady then tells us—

The Minister for Science, Energy and Industry (Mr. John Battle): What would the Opposition do?

Mr. Redwood: The Minister wants to know what we, the Opposition, would do in power. I shall tell him in a moment. I wish first to finish my analysis of the President of the Board of Trade's extraordinary statement that the long-term framework is to be welcomed and that it is delivering stability. It is not delivering stability and it is certainly not welcome to manufacturers.
There is no stability in the exchange rate. The right hon. Lady should watch it: the rate is going up day by day. She should understand that, as a result, business cannot adjust at the necessary pace. The right hon. Lady tells manufacturing business, which has done a great deal to raise its productivity and efficiency over many years, that it must now keep up with a devaluation of the deutschmark and the franc of one third over a period of 18 months. Good, efficient businesses cannot achieve that pace of adjustment in that short a time frame because they were already trying extremely hard to make good products at a commercial price. The right hon. Lady should understand that things are not well.
The Government ask the Opposition for ideas on how they could get out of a mess of their own creating. The Opposition are not short of ideas on how pressures could be alleviated or removed. I shall give the impatient President of the Board of Trade and the Chancellor of the Exchequer the benefit of our advice. First, the Chancellor should promote savings; he should not undermine them. When there is a danger that a consumer boom will get out of control, the right hon. Gentleman should be encouraging people to save rather than to spend. Instead, he threatens to remove the tax relief from personal equity plans and tax-exempt special savings accounts. He makes a modest U-turn, but he leaves a system of savings taxation less favourable than the one he found, instead of making it more generous, which would have been the right response at this stage of the cycle.
More important, the Chancellor completely undermines pension saving by a huge, swingeing tax on people's pension prudence. That is a great disincentive for more people to come out of a state pension scheme to set up their own savings funds for their retirement. The Chancellor should be promoting saving for retirement now, not undermining it.
Next, the Chancellor should remove the burden of extra taxes on manufacturing businesses, which will bear the brunt of many of the taxes in his two Budgets to date. They will pay the bulk of the huge sum that I mentioned in my exchanges with the President of the Board of Trade. I noticed that she did not deny the figure that I put into the record—the £25,000 million of additional taxation that is the result, for this Parliament, of the Chancellor's Budget efforts so far. We have the impact on business of the windfall tax, the pensions tax, corporation tax changes and all the other back-door stealth taxes by which the right hon. Gentleman is hitting business activity and motoring.

Mr. Butterfill: Will my right hon. Friend confirm that the Red Book shows not merely that our taxes are increasing but that the proportion of gross domestic product taken in taxes—that is the important factor—will rise every year for the lifetime of this Parliament?

Mr. Redwood: That is right. My hon. Friend makes an extremely powerful point. We have a Chancellor who is out to tax people heavily, especially business. I notice that there is silence from on the Government Front Bench, because they know that what we say is true. The figures are in the Red Book. We have not invented them; those we have extracted them from a rather complicated document in which they were well concealed. They were there, however.

Mr. Ian Bruce: Has my right hon. Friend noticed that the Labour party has always said that it is against people in business who are successful subsidising the low payers? Has my right hon. Friend noticed also that national insurance changes mean that those who pay their staff good, high wages are subsidising those who pay low wages? I thought that the Labour party was against that sort of thing.

Mr. Redwood: My hon. Friend makes a powerful point. He might discover that there is a division of opinion between the President of the Board of Trade and her Department of Trade and Industry Ministers on the one hand and the Chancellor on the other. The Chancellor is trying to make it cheaper to employ people on lower income levels, whereas the President of the Board of Trade and her colleagues are trying to make it dearer. That is the purpose of the national minimum wage and the likely pay awards which will result. I shall come to that tension a little later.

Mr. Clive Soley: In the event of a future Conservative Government, would the right hon. Gentleman repeal our national minimum wage legislation?

Mr. Redwood: I have often been asked that question. Labour Members will have to restrain their impatience. My right hon. and hon. Friends and I will come to a decision nearer the time when we write our manifesto, on which of the many bad and damaging Government measures we are able to offer immediate relief. It would be foolish to set out now which of the large list of measures that we would like to repeal we shall definitely be able to repeal. We shall take a sensible judgment at the time. In the meantime, we shall offer strong opposition to the items that we think are wrong, in the hope that the


Government, which have about another three years ahead of them before we hope to displace them, will listen to our arguments in the interests of better national success.
It is a great pity that the Chancellor did not work out last year in his first Budget the consequences for manufacturing. I warned then, with my right hon. Friends, that manufacturers and savers would take the hit of his first Budget. Now the damage is becoming visible even to the Treasury when we read the small print in the Red Book.
Earlier this week, I was passed comments from the British Leather Confederation. It set out what this Budget and the previous one mean to a manufacturing sector. It is one of many that I could have chosen. I am told in the confederation's communication that, in the past six months, two of the largest tanneries in the United Kingdom have closed. Even the most successful companies in the industry have been losing export business and shedding labour.
Another example which is given in the letter is that one tannery had more than 70 per cent. of its output exported, but that had been slashed to 30 per cent. and might well fall further. Those are the difficulties faced by individual industries.

Mr. Austin Mitchell: The right hon. Gentleman may well go on about tanning, after the way in which the Conservative party was tanned last year.
The right hon. Gentleman is not dealing with the point that he raised at the opening of his speech, which is that the pound is overvalued. None of the piddling measures that he has given us will have any effect on the valuation of sterling. Will he tell us what he would do to get the pound down? What was the advice that he gave to the then Government from 1979 to 1982 and from 1989 to 1992, when we were in a similar situation?

Mr. Redwood: I was not a great fan of the exchange rate mechanism in the latter period to which the hon. Gentleman referred. I was much in favour of the then Chancellor intervening and securing lower interest rates at that stage because of the damage that the then rates were undoubtedly doing. We learned from that experience. The policy was recommended by the Labour party in opposition as well as by my right hon. Friends. We hoped that this Government might have learnt from it as well.
A collective decision was taken by the House, with the Labour and Liberal parties in full support. It is— [Interruption.] The Chancellor laughs. We are talking about the only economic policy that the Conservative Government followed that the right hon. Gentleman supported. He supported ERM and therefore must have had some responsibilities for the consequences. It was a good example of how at that point it would have been better to have left earlier, and to have had lower interest rates earlier, to avoid some of the damage.
The Chancellor is underestimating the impact of a strong policy of promoting saving. If we were successful in promoting a lot of saving, it would take some of the heat out of the economy, and the adjustment through sterling and interest rates would not have to be so strong on the manufacturing sector. He should also remember

that my right hon. Friends and I opposed his idea of giving away the power to settle interest rates which he thinks are correct for British manufacturing industry. That is another part of the problem.
I do not blame the Governor of the Bank of England. Given the awful Budgets that the Chancellor has announced, the Bank of England has had no choice but to increase interest rates. It would have been much better if more of the strain of adjustment had been taken in the Chancellor's Budgets instead of in interest rates. Labour Members say that that must mean higher taxes; it means higher saving. If the savings ratio were not plummeting under the Chancellor's proposals, there would not be so much strain on the exchange rate and the interest rate.
Just look at the damage forecast by the Chancellor. When the Conservatives left office in 1997, the Labour Government inherited a £4,500 million trade surplus. Their forecasts say that next year there will be a £6,500 million trade deficit. The price of Labour so far, on their numbers, is an £11,000 million plunge into the red on our trade account. When we left office, people were saving 11 per cent. of the nation's income. The Government's forecast for next year is that it will be only 9.5 per cent. The price of this Chancellor is a one-sixth reduction in savings as a proportion of national income.
Meanwhile, the President of the Board of Trade sits smugly in her grace-and-favour apartment and does nothing to stand up for British manufacturers, British exporters or British savers. When I asked her to defend the £25,000 million tax hit on British business over the lifetime of this Parliament, she had the audacity to tell me, "Well, the rate of corporation tax is down." People are not interested just in the rate of corporation tax. They want to know how much in total they will pay, and, in total, business will pay a great deal more tax because of this Chancellor.
Government figures show that business will pay £4,600 million more corporation tax as a result of the changes. I have Inland Revenue press release No. 9. It shows modest reductions to business because of the drop in the rate to 30 per cent. However, it then shows much bigger increases because of the change to instalments and the abolition of advance corporation tax. The overall net Exchequer effect is £1,000 million in 1999, £1,300 million in 2000–01, and £2,200 million— £2.2 billion—in 2001–02. That is a massive £4,600 million increase, from 1998 to 2002.
If that were not enough, there is Inland Revenue press release No. 6—one on which the Chancellor did not dwell much in his statement—about much greater taxation of company cars and car fuel.
We have Inland Revenue press release No. 12, "Taxation of Income from Property", with a £50 million one-off increase in tax. We have Inland Revenue press release No. 15, "Formal Consultation on the North Sea Fiscal Regime". Will the Chancellor promise the House today that, as a result of that review, there will be no increase in oil taxation? I shall give way to him if he wishes to confirm or deny that. The fact that the Chancellor will not intervene shows that the Government intend to up oil tax as a result of Inland Revenue press release No. 15. We then have Inland Revenue press release No. 30, which is about introducing tax on construction workers. Again, that means that more tax will be imposed.
Only the President of the Board of Trade could not have noticed that all that represented a series of tax rises. Can she really believe that the Chancellor has cut business tax? How does she explain the fact that business will be so much worse off following the Chancellor's Budget? Or does she wish to leave the House with a misleading impression on this matter?
Of course, Labour want the headline "Corporation Tax Rate Down", yet companies pay more. Labour wants the headline "Advance Corporation Tax Abolished". It all means that companies will pay more corporation tax as a result of the Budget.
When is a tax cut not a tax cut? When it comes from the present Chancellor. It was a miserable Budget. It was a miserable speech delivered in a miserable voice for a miserable purpose: taxing, taxing and taxing again. When the Chancellor was in opposition, he was Mr. Post-neo-classical-endogenous-growth-theory. We all loved that one and would like him to play it again. Now that he is in government, he might still be endogenous, but he is forgetting the growth. We now see endogenous mess theory.
I have not always thought that Matthew Parris observed things entirely accurately, but I was in total agreement with him when he said, after the Budget:
Tony Blair
looked
so dreadful… Sallow and drawn, his face puckered by anxiety and a cartoon frown".
It is no wonder the Prime Minister and the Chancellor have fallen out, because the Chancellor has not lived up to his own star billing. His Budget had to be watered down by an apprehensive Prime Minister.
It was a bits-and-pieces Budget with little left alone, but little changed decisively for the better. It is true that there were a couple of welcome U-turns. I see that the Chancellor needs to be cheered up. We are delighted that he gave in over existing personal equity plans and tax-exempt special savings accounts, but he should not have mugged them in the first place. The dirty deed said then now does damage that lingers on. It puts people off saving. It makes them more worried than they should be about saving, because they can never be sure what the Government will do to their existing saving plans.
We are glad that small businesses will be let off some of the extra corporation tax that the Chancellor had planned to heap on them. They do not have to be grateful for relief from an imposition that they should never have had to face. It does not make them better off than they would have been under a Conservative Government. It just means that they have been relieved of some of the burden that other businesses have to suffer under a Labour Government. It is a great pity that the Chancellor will not do the same for bigger businesses, especially for manufacturers caught by high sterling.
The Chancellor has warned that growth will falter if wages go up too fast. I agree that there is a danger that wages going up too fast could do damage. He may be right. Why, then, is the President of the Board of Trade passing legislation to make wages go up faster? Why can the two of them not agree a rate now, in a democratic and civil way, and tell the House before the legislation is completed? It is most extraordinary to put a measure through both Houses recommending a minimum wage and

not tell anyone in the House of Commons or the other place what that minimum rate will be. That rate will have huge consequences for the Chancellor's Budget and for the cost of public services and public borrowing. As the Chancellor himself admits, it will have big consequences in due course for the rate of growth and inflation—but he and the President of the Board of Trade cannot agree the rate, so we all have to wait while they sort out their disagreements.
The Chancellor's views are clear. We read in the press, courtesy of his spin doctor, that he wants a low rate, probably below £3.50 an hour. In the Red Book he says clearly:
Responsible pay bargaining, combined with the Government's welfare to work measures, would allow faster growth and higher levels of employment over the next few years.
I welcome that statement. It shows that the Chancellor has understood that, if the Government boost wages too much, even for the best of reasons, it will be destructive of the very jobs that they need to give hope to people with few skills, and the younger people who need jobs. It would be a cruel policy. Yet the Chancellor cannot persuade his colleagues in the Cabinet to come straight out with a sensible rate from his point of view and end the tension around the Cabinet table.

Mr. Butterfill: Would it not also be profoundly inflationary, thereby ensuring that interest rates would have to remain high, and the pound would remain uncompetitive?

Mr. Redwood: It would certainly mean that interest rates would have to remain high or go higher if the Government lose control of wage settlements. I am sure that, privately, the Chancellor is apprehensive about that. It is important, therefore, that he gets some sense into his colleagues over their wages policy.

Mr. Bercow: My right hon. Friend just informed us of the Chancellor's view about the potentially damaging impact of a high minimum wage. Is my right hon. Friend aware that the Chancellor's view is in conflict with that of the Minister of State, Department of Trade and Industry, the hon. Member for Makerfield (Mr. McCartney), whose McCartney curve tells us that a higher minimum wage is good for the economy because it will boost consumer expenditure? Is that another example of the splits in the Government?

Mr. Redwood: My hon. Friend has put his finger on an important point. His example also shows a breakdown of collective responsibility. On this occasion, the Chancellor is right. He is clearly the senior Minister in the argument; he should instruct the Minister of State that the official Government line is that higher wage settlements are unhelpful, and that a realistic minimum wage is crucial to the attempt to retain some control over wage settlements.
If the President of the Board of Trade introduces a minimum wage that really does lift wages at the bottom, everyone will want a pay rise to protect differentials. I hear that members of the Cabinet, including the right hon. Lady, wish to retain their differentials over junior Ministers. If people on £100,000-a-year packages want to keep their differentials over others who are fairly well paid, surely people on £15,000 or £20,000 a year will


want the same, and they will have a better case. The Chancellor must be very worried that he will have to face not just the cost of rises at the bottom of the income scale, but the understandable request of many higher up the income scale for a similar percentage increase in their pay, with all the consequences that he identified.
Both the Chancellor and the Prime Minister say that we need flexible labour markets to compete successfully. The Confederation of British Industry agrees, and, again, I find myself in agreement with the Chancellor. Why, then, is the President of the Board of Trade doing all that she can to make our labour markets less flexible? When will she make up her mind about compulsory union recognition? Will she give in to the union bosses, and say that 50 per cent. of those voting should decide the issue, or will she be more cautious and leave it at 50 per cent. of the work force?
It will be a defining moment for the right hon. Lady when her left-wing friends discover whether there is any of the old crusader remaining in her, or whether she is selling out. Her silence again today on that crucial issue speaks volumes about her unhappiness in this Government of the spin doctors, by the spin doctors, for the spin doctors.
The Chancellor, the great meddler, is en route to becoming the great betrayer. When his party was in opposition, he huddled in the House of Commons Library, ransacking the statistics for any bad figure that he could alight on. That would make his day: it was being so miserable that kept him going. It is normal for Ministers to whistle a happy tune, even if they are whistling in the dark. Now, it seems, this dour Chancellor sits in the Treasury, out of sight, still dissecting every statistic and, like Jeremiah, rubbing his hands at every piece of bad news.
The Chancellor warns us that, if we drink, it is bad for us, so he will tax it. He warns us that, if we drive, it is bad for the environment, so he will tax it. He tells us that, if we save for the future, it is bad for social justice, so he will tax it. He tells businesses that, if they make profits, it is bad for inflation, so he taxes that too.
Of course all Governments must impose some taxes, but sensible Governments do not enjoy imposing them. The only point at which the Chancellor cheered up during my speech was when I was talking about higher taxes: he obviously gets a kick out of them. Nor do a sensible Government moralise over every tax that they do impose. This Government like taxing. They enjoy the sense of power that it gives them. They would tax more and more if they thought that they could get away with it, and they use taxes to meddle endlessly in our lives and those of our businesses.
Even when it comes to reforming welfare, it is industry that is asked to do the work. I do not believe that business can cope easily with working out and implementing family tax credits. People in hard-pressed companies do not want to become a different kind of Child Support Agency, and to make all the inquiries that they would need to make to meet the Chancellor's requirements.
The bottom line of this Budget, added to the Government's first Budget, is that we are all worse off. Companies are much worse off; families with mortgages and cars are worse off; people relying on pension savings

are worse off. The typical family is more than £1,100 a year worse off following the five mortgage rate rises, the cut in mortgage interest relief at source—the Chancellor hangs his head in shame, as well he may, but this is all true—the petrol taxes that he has increased, and the pensions tax.
Less than a year ago, in that golden age, a litre of petrol cost 54.9p in a good garage. Today, it costs 65.9p, despite a big drop in the oil price. That is all the Chancellor's own work. He does not know, because he now has his tank filled on the firm, but if he had to go out and fill his own tank he would find out. He is lucky that we no longer hear about the price of a gallon, because he has put that up by a massive 40p.
I am told by those who smoke that last May a packet of 20 cigarettes cost around £2.95. Today, it costs £3.35. Again, that is all the Chancellor's own work. Today, a young person saving for a pension must put aside £120 a month, while £100 did the job last May. That is a huge increase in the cost of taking a prudent view of the future and wishing to make provision.
The Budget sandbags the farmer as well as the industrialist. Labour moves seamlessly from having high sterling to banning T-bone steaks. It is determined to destroy rural businesses. [Laughter.] I am glad that Labour Members find that amusing. The butchers to whom I have spoken do not find the ban on T-bone steaks at all amusing. It has cut away a piece of their business when they are already under pressure. Labour Members representing rural areas should listen to what businesses are saying in those areas.
What do villages say about Labour? The pharmacist fears for his business as the Competition Bill threatens to knock his prices. The butcher struggles to stay out of gaol when his customers demand beef on the bone. The newsagent wants to know if Labour Members are going to abolish the newspaper boy. The publican can get no sense out of the Department of Trade and Industry on what business he can do with the brewer under the new competition measures that the right hon. Lady proposes. The farmer whose income has already been halved faces an even grimmer year with high sterling and high petrol prices.
Country dwellers need their cars, and they are particularly hard hit by the petrol price rise. The Chancellor's £50 million sop for regional transport will do little to help. In his haste to attack car owners and manufacturers, he appears not to have understood the difference between engine size and fuel omissions, and is still in a muddle about exactly how to raise all the money that he wants. And what about the tax on new cars which was announced in a press release in January? The Leader of the House told the Opposition that it would appear in the Budget, but it has not—yet manufacturers have been told by letter that it will apply.
That is the reality of Labour government—tax by stealth; no stability, just permanent uncertainty. Then we are all meant to feel grateful because income tax rates have not gone up. Under the Conservatives, they used to come down Budget by Budget. The standard rate fell from 33p in the pound to 23p. Why should anyone feel better as a result of this Budget, which contained no such welcome change?
The exporter struggling with the pound at DM3.06 still has to struggle after the Budget, and cannot now look forward to a change of policy: he has no hope. The


manufacturer struggling against ever-cheaper foreign goods now knows that he must cut his operations, as the Government have nothing to offer him. The unskilled person seeking a job knows that he must hurry before the minimum wage starts to price people out of work, according to the Chancellor's own statements. The home owner knows that the five mortgage rate rises are here to stay, and that he may be in for more. The saver knows that saving for pensions will remain a dearer business. Labour is not making it better; it has made it worse. Labour is bad for business.
The media strategy of the Budget was handled better than the economic strategy. That is not good but dangerous, and people should not be taken in by the weeks of bombardment threatening every industry and individual in sight with higher taxes. They will discover that some will be spared, while some will face the ordeal of consultation before the extra taxes are imposed. There have been threats to the house building industry, threats to the sand and gravel industry, threats to the oil industry, threats to savers, threats to home owners and threats to car owners. There are to be all sorts of extra taxes, and people do not feel especially grateful that some of them have been dropped—at least temporarily—from the Chancellor's Budget strategy.
We should not feel grateful for what the Chancellor has not done; we should look at what he has done. We should remember what he said in opposition about manufacturing and the importance of industry. In a chapter of his book "Where There is Greed", entitled "Manufacture or Die", he wrote:
It is our ability to produce manufactured goods and compete in our own and in world markets that is central to our industrial and economic performance".
Those are fine words, but he has not lived up to any of them. The very people whom he praised in that book now bear the brunt of his Budgets and his failed strategy.
The Chancellor says that he gave the Bank of England its independence so that it would be free to control inflation, that high sterling is the Bank's problem, and that he has done his bit. He certainly has: his Budgets and his refusal to take a Chancellor's responsibility for the pound are destroying exports, manufacturing and agriculture, and damaging savings and jobs. Far from being the Chancellor for manufacturing, savings and investment, he will go down as the Chancellor who stood by as people were laid off and factories were closed. The main memory from this Budget will be of a Government who do not care about industry at all.

Mr. Robert Sheldon: The right hon. Member for Wokingham (Mr. Redwood) says that we are worse off as a result of the Budget. I do not know how often he visits his constituency at weekends, but that is not the position as I see it. People think that this is not a bad Budget—they have not got everything that they wanted, but that is the nature of life. This is certainly a reforming Budget. As with all major reforms, it will take time before we are able to assess its full impact and the extent of changes to the conduct of our economic affairs.
The highlight of my right hon. Friend the Chancellor's work is undoubtedly the welfare-to-work programme. In my constituency, I have frequently met unemployed young men who live next door to houses where the

windows are rotten and the doors are falling off. Our inability to bring together people who want to work and jobs that need doing, and our failure to address what is being done and what needs to be done, is disgraceful.
People spend a great deal of money to go out to work. It was not always an expensive business: when the cotton industry was the mainstay in my constituency, we had one of the highest levels of working women in any industrialised country, and they did not need encouragement to work. The work was down the road, earning a living cost hardly anything, grandmothers and aunts looked after children, there were no transport costs and income tax was only for the better off. Those are now large expenditures that, together with the tax-benefit mismatch, have great disincentive effect.
Fundamental changes have been necessary for a long time. Ideally, transport costs, which are a major expense, would be tax deductible, but problems are associated with that. Child care allowance is an acknowledgement of work-related expenditure and, although I am not sure that I understand the way in which child care centres will be set up and accounted for, I applaud my right hon. Friend's determination to implement the necessary changes.
When I was at the Treasury, the replacement of child tax allowance with child benefit recognised the extra cost of raising a family and their reduced taxable capacity. We acknowledge taxable capacity to only a limited extent, such as in working tools allowance and some working clothing allowances. Income tax allowance did not benefit parents who did not pay income tax, but for once the two major parties agreed on a fundamental issue and changed tax allowance to a benefit. The Government and the Opposition reached a sensible decision together, and there was 20 years of agreement on it. I wish that such long-term agreement was more frequent: it should be the basis for everything other than a one-Administration reform that the Opposition intend to repeal. Such reforms are a disgraceful waste of time and effort and should be avoided wherever possible. Although I understand the needs of the Revenue, I support the recognition of the cost of child rearing.
The Government took office accepting that manufacturing industry faces problems, and I had hoped that they would help by improving capital allowances and making the pound competitive. Figures in the Red Book suggest that the future does not look good. The forecast growth in manufacturing output is 0 per cent. to 0.5 per cent for 1998, against an increase in gross domestic product of 2 per cent. to 2.5 per cent; 1 per cent. to 1.5 per cent. for 1999, and 2.25 per cent. to 2.5 per cent. for 2000. The conjunction of those figures with forecast balances of payments of minus £6.5 million for 1998, minus £6.75 billion for 1999 and minus £6.5 billion for 2000 shows the importance of manufacturing industry.
Manufacturing industry is important not for the number of people it employs, but for the wealth it creates and for its foreign earnings. I welcome improved capital allowances and the 40 per cent. rate, although I am sorry that we have not continued with the short-term capital allowances. I had hoped that the rate would be 60 per cent., which would have been worth while in the light of the difficulties that manufacturing industry faces with the high pound and high interest.
The right hon. Member for Wokingham must have forgotten the wanton damage that the previous Government did with their $2.40 pound and their


17 per cent. interest rates. I shall never forget it, because more than 30 per cent. of the firms in my constituency closed their doors in two years. Germany and Japan—indeed, every country in the world—have similar medium-tech and high-tech firms. The sacrificing of manufacturing industry on the altar of dogma was disgraceful, and the previous Government should never be forgiven for it. Current exchange rates and interest rates are nowhere near such levels, but service industries are able to ride them out, which is why GDP is still increasing respectably. Manufacturing industry has suffered most. Having given control of interest rates to the Bank of England, my right hon. Friend the Chancellor has to take account of their requirements in the running of the economy. His Budget strategy is bound to be limited by that, and he will therefore be judged not so much on demand management, as he would have been in the past, but on the important tax and other measures that he has introduced.
The quickest way to reduce unemployment is through aggregate demand, but that is not easily open to the Chancellor. However, my right hon. Friend's redistributive approach is clear, and I look forward to it featuring prominently in future decisions.
How does the Budget fit in with the forthcoming single European currency? The consequences of our self-exclusion from monetary union cause me great unease. Britain is the only major country that will not participate. Sweden, Denmark and Greece have the luxury of not joining, because they would not influence the shape of the union to any important extent, whenever they joined.
Britain is in a different position. If we had joined at the outset, we could have made an important contribution to the development of economic and monetary union. Latecomers to institutions are at a serious disadvantage in determining rules and outcomes. Sweden, Denmark and Greece would not have affected the rules, but Britain could and would have done. We have failed to join institutions at the outset again and again.
I should have wished ardently for a postponement of EMU, which is too precipitous. It will take place, and we should have placed ourselves where the action is. There may be problems with the euro. My right hon. Friend the Chancellor of the Exchequer was well received in York on Saturday. He explained what needed to change in the European Union. His advice would more likely be taken to heart if we were participating members of the single currency. The difficulties facing the participant countries are obvious. We should not underestimate the will to make changes within the European Union to deal with problems as they arise. There may be some mush and fumble, but problems will be dealt with, because member countries will not want to admit defeat and face the enormous turmoil that the collapse of the single currency would create.
We may not like some of the solutions, and I am worried that we shall not be properly involved in the initial decisions or in the subsequent changes that will affect us. Historically, we have always paid a price for our hesitancy: our voice should have been heard. We could have at least announced that we intended to join,

which would have given us a foot in the door. If it were known that we intended to join, we should perhaps be listened to more seriously.
The major advantages of the City of London have been affected. We have lost some of the financial services market to Frankfurt as a result of our indecision. What saddens me most is that we should have been the bridge between the United States and Europe, sharing the language of the one with the geography of the other.
We must decide on the arrangements for the pre-entry stage to membership of monetary union. Some companies have never had to operate dual currencies to anything like the extent that will soon be required. Daily euro transactions will be a major part of their business. Even the retail trade will have to cope with those changes. Some shadowing of the euro will be necessary, and I should like to be assured that the Chancellor is developing plans to deal with that.
It is clear to me that the cost of the national health service will rise faster than the rate of inflation or growth in the economy. The population is aging and, as wants are met, the health service will require increasing expenditure. The time will come when we shall have to consider private medicine, which I do not favour, or a special national health service tax.
Anyone who has served in the Treasury has a visceral feeling about hypothecation: it burns inside us. The road fund licence still casts its shadow 70 years later. An important weakness of hypothecation is that it does not take into account the changing patterns of priority and expenditure. One certain aspect of health is that demand will increase into the indefinite future. If people can see the consequences, they may be more willing to accept a national health service tax than other taxes that disappear in the vast generality of public expenditure. Despite the hostility aroused by such a proposal, it should be freshly examined, and I hope that my right hon. Friend will consider doing so.
Meanwhile, we have had the first instalment of the reforms that my right hon. Friend will continue. We look forward to his later contributions.

Mr. Kenneth Clarke: The Chancellor's Budget speech was commendably short in length and disgracefully short on detail—to an unprecedented degree—but it was long on rhetoric. I did not totally disapprove of some of his rhetoric: my theme was always that we should have no return to boom and bust. The trouble is that the Chancellor is not quite aware of the risk he is running of a return to boom and bust; nor does he know what to do about it.
I enjoyed the Chancellor's repetition of our slogan of welfare to work. I agree with him that one of the best solutions to the problems of poverty and social exclusion is work and the opportunity of work. Unfortunately, I am not at all sure that his repackaging of our measures is wise, and his Budget will not make it easier for businesses to create jobs.
The Chancellor added some new, portentous rhetoric about being a tax reformer, and about how this was the most tax-reforming Budget for a generation. I agree with my hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley), who spoke on Thursday, that this grandiloquent language was not matched by the measures it announced, which were a ragbag of tax reforms.
Several of my right hon. and hon. Friends have made the point that the overall effect of the Chancellor's tax changes is to continue the practice of putting a considerable burden of extra taxation on the very businesses that must create jobs if more people are to move from welfare into work. When the President of the Board of Trade explained some of these tax changes, she seemed totally oblivious to the overall upward effect they will have on the businesses for which she has departmental responsibility. She was partial in her selection of examples to illustrate the changes.
In less than one year in office, the Government have increased the burden of corporate taxation by more than £20 billion. My right hon. Friend the Member for Wokingham (Mr. Redwood) could get no denial of his figure of £25 billion; I thought that the figure was £22 billion. Whatever the figure, the President of the Board of Trade obviously does not want to intervene to rule between us. It is certainly an enormous additional burden.
Considerable change has been made to capital gains tax. It is already our most complicated tax, and the most difficult to comply with and to collect, and it will be even more complicated in future. I happen not to agree with the theory that, if people produce a given capital gain on a sum of money in two years, that is bad, and if they make the same capital gain but take 10 years doing so, that is better. I was never attracted by the taper idea, which distorts the figures and is not wholly consistent with making the best use of resources for investment. The complications that will now face any taxpayer who is so reckless as to want to go in for self-assessment, or who needs the advice of his accountant, will be bewildering.

Mr. Ian Bruce: I am sure that my right hon. and learned Friend was proud of the fact that capital gains relief was given to people who retire. Did he think that the Chancellor had improved the position? Has not the Chancellor decided to phase it out and to apply capital gains tax?

Mr. Clarke: The Chancellor has made the position less attractive for the owner-manager and people who are building up their own business: my hon. Friend makes a valid point.
Even more important are the changes made to employers' national insurance contributions. I concede that simplification is desirable in principle, because the aim of tax reform should be to make the system more simple and not more complex. However, the effect of making these changes now was brushed aside by the President of the Board Trade.
The cost of creating employment for employers whose employees are largely low paid is reduced, but the cost of providing jobs for employers whose employees are well paid—not very well paid, but on average earnings or above—is much increased. At this difficult time for many an industry, the effect will be arbitrary.
It may be good news for the retail and hotel and catering industries, and I have no objection to that. It will be extremely bad news for people who employ large numbers of professional or highly skilled staff. The total effect of the Budget on a medium-sized, high-tech business is particularly unattractive: the burden of creating jobs will be made worse, especially when the increases in corporation tax are also taken into account.
The way in which the Chancellor and the President of the Board of Trade explained the effect of the changes in corporation tax was disgraceful. It was an attempt to mislead the casual listener. We are constantly told that the rate of corporation tax is being reduced, but the method by which it will be collected from the bulk of British business will produce a very heavy flow from business to the Treasury.
I had understood that there was to be consultation on that issue after the green Budget in November. After the trailing of the proposal, it took about 24 hours for everybody to realise that it would bring the Treasury at least £8 billion over the lifetime of this Parliament. The response to the consultation in the Budget was one sentence, which made it clear to those who were interested—but not to anybody else, because it was tucked away—that no change of mind was taking place.
I welcome the fact that the new system of advance payments will not apply to small and medium companies, but it will be burdensome on the rest, and I think that the benefits will accrue only to those who make profits of £1.5 million or less a year. What about a company with profits of £2 million a year, which will not be a giant company? It may be a hi-tech company located in a science park of the type that I have described. Such companies are adversely affected by the Budget, and the overall effects are severe.
Disingenuous arguments are still being used. The President of the Board of Trade repeated that, when the full effects come through, which will be in about 2002 according to the Government, business will start to save about £1.5 billion a year. That assumes that the lower rates of corporation tax will continue for that time until the benefits begin to flow.
However, the commitment to the lower rates is only for the lifetime of this Parliament. The Chancellor is committed to them for as long as he needs them to sell the bogus proposition that he is helping business while raising a large sum from it. If there is a threat that the cash flow will reverse from the Treasury back to business, the Chancellor may use the latitude he has left himself to start raising business taxation.
On the basis of what he has done so far, the Chancellor is eager to raise business taxation, for entirely populist reasons. The President of the Board of Trade gave that away when she gave her list of alternatives that might upset the public if the Government resorted to them.
I will not burden the House with the argument that I used before. The Chancellor did not need to raise taxation on such a scale, because the public finances are altogether healthier than he constantly describes them. He continues to give pessimistic forecasts of the public sector borrowing requirement. As we said at the time, he gave pessimistic forecasts in November, but he will get into balance very quickly.
I agree with the policy aim of moving people from welfare dependency into work. I commend any move in that direction. I was in favour of doing what we could to improve the previous family credit system, and we introduced a generous disregard for child care to help women with obligations to provide care for their children so that they could, if they chose, take low-paid work and cease to depend on benefit. There has been an elaborate repackaging of family credit and child care allowance into the new system of the working families tax credit.
My hon. Friend the Member for Bury St. Edmunds worked with me on several Budgets. Anybody who is interested in the subject is aware of the system in some countries of earned income tax credits. Like so many of the Government's policies, that one has been taken from the Clinton Administration. I remain to be persuaded that the Government, who are anxious to present a policy that they could claim to have invented and to dissociate themselves from the policies of the previous Conservative Government, are wise in importing a system that is not regarded by everybody in the United States as an all-fired success.
In any event, there are big differences between the systems in America and Britain. The Americans lack two British policies. First, they do not have our system of pay-as-you-earn: everybody in America is required to submit an annual tax return. Secondly, America does not have our system of separate taxation for a woman and a man as a couple. They are at a disadvantage compared with us in not having either of those systems, and that makes it difficult to bring earned income tax credit into this country. A great cost is involved in bringing it in, some of which is due to increased take-up and some of which will be incurred by taking people further up the scale into benefit. It is more than that, because, under the new system, there are PAYE complications for the employer. There is also the administrative complication of turning the Inland Revenue into a department that will pay out money to people with children.
Many supporters of the new system are shocked to discover that it cannot be introduced before October 1999. A great deal of money and administrative time will be spent trying to hit that deadline. The Inland Revenue does not know anything about children. Under our tax system, it does not know whether taxpayers have children, because there is no child care allowance. The Inland Revenue has never paid out money by itself or indirectly through employers in its experience. The Department of Social Security has always done that, but now the two systems are to be amalgamated. The cost of the complication will be considerable.
In future, an employer will know all about the circumstances of each employee. When we made family credit more generous, Labour Back Benchers said that we were subsidising low-paying employers, and that that was terribly wicked. It was said that we were subsidising low pay, but that was not true. Under the family credit system, many employers do not know that an employee is drawing family credit. The snag under the new system is that every employer will know exactly how much each employee is getting on top of his pay.
Another issue is the transfer from the mother to the father. What happens if a benefit for the mother is taken as a tax credit by the father if he is the principal earner? When the Government started to trail the idea, that matter was raised by a number of commentators, including me. The Financial Secretary to the Treasury joined in the debate about the purse-to-wallet problem—I do not like the jargon—that that transfer posed.
The Government's answer—that people are given a choice—is absurd. The mind boggles. Of course some will make a sensible choice, but one can visualise a discussion between a mother and father about the

comparative advantages of one taking a benefit or the other taking a tax credit. No doubt the Chancellor fondly imagines that such people will take their accountant's advice. People who contemplate moving from benefit dependency to low-paid work may not be able to do it, and that is another complication.
I approve of the objective of concentrating on subsidising low-paid jobs to widen the gap between earnings from them and the long-term receipt of benefit. The previous Government and this one appear to share that objective, but for the sake of originality, and to enable them to use grandiloquent phrases about transforming the tax system, the Government have wished upon us an extremely complicated new arrangement of dubious value.
I have said how much I agree with the Chancellor, but I wish that he would not overdo the way in which he sells his policies. Sometimes, he makes it sound as if the creation of jobs is essentially a function of the relationship between the tax and benefits systems.
New Labour seems to agree with some of my right-wing colleagues who are no longer in the House and who thought that the whole problem was the feckless poor. It was said that out there were many jobs, and that people were unemployed only because they had consulted their tax advisers and had decided that the marginal rate of reduction was too great to make it attractive for them to take advantage of the employment.
That is not the case. The reality is that the northern part of my county, where the coalfields collapsed, and Doncaster and Barnsley a bit further south, are not full of single women who would take jobs if only the cut-off rate was not so sharp. We simply have not reached the stage where, with the development of the real economy, these jobs are being created in sufficient quantity. Vis-a-vis my previous point—no return to boom and bust—we were going in that direction.
The Chancellor appears to have no interest in the real economy. He prefers social reform to macro-economic policy. He has left macro-economic policy to the Governor of the Bank of England. I remember being in the House when everyone complained that demand management and control of inflation were entirely a function of monetary policy. People used to complain about one-club golfers running the economy. The Chancellor is a one-club golfer, but he has given the club away to the Governor of the Bank of England, and he now says, "What goes on out there in terms of managing the economy has nothing to do with me."

Mr. Malcolm Bruce: Is the right hon. and learned Gentleman's party in favour of taking this power back, and then handing it over to the European central bank?

Mr. Clarke: I am in favour of this country's authorities, for which the Chancellor took sole responsibility when he took over, taking a proper view of their responsibility for the macro-economy. Our jobs and living standards depend on that.
Governments do not create jobs. The tax-and-welfare system does not create jobs, except in the relevant offices. It is the duty of Government to try to create the conditions in which people in industry, business and commerce find it easier to create jobs and to raise people's living standards. In his speech, the Chancellor made it clear that


he has no interest in that, and the President of the Board of Trade appeared to take only a passing interest in that aspect today, giving a wholly rosy view of where we are.
The fact is that business generally is faced with a combination of higher taxation, higher interest rates, an overvalued pound and a Chancellor, President of the Board of Trade and Government who do not believe that their fiscal policy has anything much to do with that. They are more concerned with social reform and the affairs of the Department of Social Security, in which the Chancellor likes to interfere. As long as we have the present Secretary of State for Social Security, it may be a good idea for him to interfere in that Department, but he should take a broader view of his fiscal measures in deciding what impact they are having out there.
There is not a direct read from monetary policy to fiscal policy. It should not, in my view, be the case that, when we tighten fiscal policy, monetary policy is relaxed, and when we tighten monetary policy, fiscal policy is relaxed; but the Chancellor and the Governor have to work in harness and at least have some common analysis of whether consumer demand is too strong or too weak, and whether it is likely to go up or to go down. They may not be able completely to control the exchange rate, but one or the other has to ask himself why it has gone up to a level that is crushing manufacturing industry, and whether either of them is going to do anything about it. At the moment, it does not seem that either of them will.
The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) talked about the problems of manufacturing industry, particularly exporters. Our export orders are going down rapidly. Manufacturing industry is about to go technically into recession. A recession is euphemistically described as negative growth for two successive quarters. This country has had five months of declining industrial production. The sixth is about to come up. Manufacturing is going into recession, and, even though service industries are thriving, the whole economy is slowing down at a remarkable rate.
Unemployment is still dropping, but at a much lower rate than 12 months ago. The turn is about to come, and we are simply waiting to see when, not whether, unemployment starts to rise again. That will put back into proportion all this rhetoric about getting people from dependency into work by playing around with their marginal rates of deduction.
The reason that the pound remains so strong—it is not the sole reason—is that we have raised interest rates in successive little steps, every time leaving the message that they are about to go up again. The reaction to the Chancellor's Budget was that the Monetary Policy Committee of the Bank would put them up again, and immediately the pound soared miles above DM3. The minutes of the last committee meeting showed that it was poised to put them up again.
The Chancellor plainly never even addressed the question whether he could do anything about that. He remains completely oblivious to what the solution might be. In his speech, the only contribution he could make to tackling the threat of future growth was, "We must control our earnings." That is all part of his rhetoric about the frightfully inflationary inheritance when he took over.
One of the good features about the British economy at the moment is that the increase of earnings has been flat for 12 months. The latest statistics about earnings growth

are exactly the same as those 12 months ago. The Chancellor was arguing about a shadow. He was missing the substance of the threat that our economy faces.
The Chancellor's own Red Book has to concede that the economy will slow down. I think that the Red Book is optimistic. I think that the economy will slow down faster than he says. The Red Book says that the savings ratio will fall. That is partly a result of what he has done to pensions and savings. Even as revised, thanks to the Robinson factor, individual savings accounts are far less attractive than personal equity plans and tax-exempt special savings accounts. Savings ratios are coming down.
None of the messages in the Budget does anything to dampen the belief that our high interest rates are going to remain in place and might go up again, or that the exchange rate will therefore remain strong against the deutschmark and the franc; of course, it is about to be very strong against the euro for some unknown period.
The Budget was well received. I agree with all the people who say that most Chancellors should have a sinking heart when Order Papers are waved behind them. When the Order Papers are waved on the instruction of the bleeper, it is perhaps a little less worrying than when they are raised spontaneously at the wrong moment in response to previous Budgets.
I do not think that all Labour Members are rejoicing about the Budget. I did a television programme at the weekend when I found that the right hon. Member for Chesterfield (Mr. Benn) and I were nearer to agreement on some of the analysis than at any time in our entire political lifetime. I do not take as much comfort from that as I do from the right hon. Member for Ashton-under-Lyne and quite a lot of sensible Labour Members, who know perfectly well that this country's economic well-being is being put at risk.
As the actual content—the tax reform—of the Budget was so comparatively inconsequential, its lasting legacy will be that the Labour party has come into power and completely neglected the prospects for sustained growth with low inflation, which it should have been pursuing.

Several hon. Members: rose—

Mr. Deputy Speaker: Order. Before I call the next hon. Member, I remind the House that, although there is no time limit on speeches today, many hon. Members are seeking to catch my eye, and it would be helpful to everyone if speeches could be moderately short.

Mr. Clive Soley: It is a great pleasure to follow the right hon. and learned Member for Rushcliffe (Mr. Clarke), the ex-Chancellor of the Exchequer. I remember hearing one of his first speeches from the Dispatch Box and thinking, "That man is a future leader of the Tory party." He came very close to it. Like Chris Patten, with whom he has much in common, he is the exiled wing of the Tory party. Precisely because he can be such a formidable opponent, let me make it clear that he should not hide his light under a bushel, but should consider making a leadership bid. If he does so, I shall do everything that I can to encourage him.
The reason why I was so anxious to get an answer from the right hon. Member for Wokingham (Mr. Redwood), the shadow President of the Board of Trade, about the


national minimum wage is precisely that he, more than anyone else in the Conservative party, has led a formidable, determined and persistent opposition to the introduction of the minimum wage. The idea that he could be a member of a Government who continued with the national minimum wage beggars belief. It would be the political equivalent of discovering, after 20 years, that Mary Whitehouse had been the marketing manager of Red Hot Dutch. It is impossible to think that he could be a member of a Government who wanted to keep the national minimum wage.
The Conservative party seriously underestimates the view that the British public have taken about its capacity to manage the economy either firmly or efficiently. When a number of Conservative Members intervened on my right hon. Friend the President of the Board of Trade to criticise our taxation policy, I remembered two things. First, I remembered the clear commitment that we gave before the general election on direct taxation, that we would not increase income tax levels—we made exactly the same comments that the Conservative party made about other forms of taxation. Secondly—and more importantly—I remembered that over the 18 years from 1979 to the collapse of the Tories at the election, the burden of taxation imposed, as a percentage of gross domestic product, was higher for almost all those years than it had been under a Labour Government. When the Tories left office in 1997, it was about one to one and a half percentage points higher than under the previous Labour Government.
The Conservative Government increased the tax take— largely through a switch from direct to indirect taxation— and thereby dramatically increased the tax burden at the same time as they caused phenomenal problems in Britain's investment policy, not least by the doubling of value added tax in 1979. That caused the first of the two Tory slumps that did immense damage to the manufacturing base of this country, from which it has yet fully to recover.

Mr. Ruffley: On the point about rising tax burdens, what does the hon. Gentleman have to say about the fact that the Red Book shows that for the last financial year that the Conservative Government were in power, the tax burden was 38.1 per cent., compared with an anticipated figure of 40.1 per cent. for the financial year 2002–03? What is his explanation for that?

Mr. Soley: What the hon. Gentleman is desperately trying to cover up is that included in his figures is the windfall tax. He cannot include that any more than we could include the windfall tax on the banks imposed by Lord Howe in 1979–80. His figures do not add up.

Mr. Bercow: rose—

Mr. Soley: I will take one more intervention, but I am conscious of what you said about time, Mr. Deputy Speaker. I hope that the hon. Gentleman will be quick.

Mr. Bercow: I am grateful to the hon. Gentleman for his courtesy in giving way. Will he clarify whether he is

saying that the Prime Minister, when Leader of the Opposition, never said,
We have no plans to increase tax at all
in September 1996, or whether he is admitting that the Prime Minister said it, but did not mean it? Which?

Mr. Soley: The hon. Gentleman knows as well as I do that my right hon. Friend's remark was made in the context of a discussion about income tax—

Mr. Bercow: No, it was not.

Mr. Soley: Yes it was. The hon. Gentleman's memory is faulty. Throughout the election and during the period leading up to it, we were very clear on direct taxation. The answers that we gave on other forms of taxation were precisely the same as those that the Conservative party gave for 18 years—that no Chancellor of the Exchequer would ever say what he would do with other tax rates. That position has always been maintained by both parties.
The Budget is excellent for British industry and for stability. Its general structure and balance are right, so I want briefly to deal with just two issues. The first is the family and children. I welcome, most of all, my right hon. Friend the Chancellor's recognition of that issue as an essential part of the structure of the state in the running of the economy. At times, we try to run the tax structure as if the old economic system still existed.
One thing that the Labour party has to learn—and which the country also has to learn—is that the economic structure changed fundamentally in the 1960s, 1970s and 1980s. That first came dramatically to my attention when I noticed that in the late 1980s in south Wales, the primary carers for more than 50 per cent. of children at home were the fathers. In other words, the heavy industries had collapsed and women were going into part-time work, leaving the men at home to look after the children.
That process has moved on and we now expect, almost automatically, that parents will have different roles throughout their lives. They may work part time or full time; they may work for short periods or for long periods. We have to develop a tax and benefits system that recognises that. Of course, it is much easier to recognise the problem than it is to determine the shape of the solution. However, I am sure that the shape of the solution includes the sort of benefits for families and children that my right hon. Friend included in the Budget. It is right to focus on the children, on child support and on parenting rather than on marriage as such. The structure of families changes, and it is difficult to come up with a definition that works.
We need to do more, which is why I should like the long-term thinking shown in the Budget to be taken further. We need to recognise that companies need to be part of the changing structure, in which parents need support at certain times if they are to work. We need to find ways to help companies to become, in the current phrase, family friendly. Again, it is easier to recognise the problem than to find the solution. However, there are companies—not least Midland bank, which took the initiative in this area—that recognise that they need to make special arrangements for parents who want to work part time and for those who leave employment for a time and then want to return to work. We should give additional support to companies that make those special arrangements.
We need also to recognise that as the nature of work changes so, too, does the nature of the tax and benefits system. I received a letter today from a constituent who was made redundant and so became self-employed. Her work takes her away from home for a period of time, and then she is back at home with her child and might work from home for a few weeks. When she is at home, she might not need child care; when she is away, she does. Because there are no effective means of recognising that and creating a structure to help her, she has to employ a full-time nanny, even though she needs one only when she is away from home or when the work she does at home is such that she needs to devote all her time to it. She actually needs a more flexible system than we have been able to provide.
My final point relates to the big issue that must be dealt with in the near future—housing finance. The Conservative Government got it disastrously wrong. I remember warning them on many occasions, when I was shadow Housing Minister, that if they went ahead with market rents, the cost of housing benefit would spiral out of control—and it did. By going to a market rent system, plus the individual support of housing benefit, there was no way to impose a cap without causing distress and difficulty for those who needed affordable accommodation. From a cost six or seven years ago of £1 billion or £2 billion, housing benefit has now risen to £12 billion—twice as much as mortgage income tax relief cost four or five years ago, when we considered that to be a problem.
If we simply cut housing benefit, the effect would be dramatic. It would be appallingly difficult for housing associations, private landlords and councils. We have to reform housing finance so that it recognises the importance of the housing market to the economy as a whole. I would prefer a bricks-and-mortar subsidy to keep rents down, rather than an open-ended subsidy on income. We also need some innovative ideas in the short term to deal with some of the housing benefit problems. I would be prepared to accept tax breaks—perhaps total tax breaks—for private landlords in exchange for guarantees about the quality of management of their properties. I see nothing wrong with indirect subsidy on that basis, as long as there is a guarantee of quality.
The three factors that matter to people in regard to housing are affordability, quality of management and— for tenants—tenants' rights. We have not got those right, nor have we got right assistance on mortgage interest for people who are in and out of work—the benefits system will pay the interest on some occasions but, unless we do something further, people will continue to be left vulnerable to indebtedness to their mortgage companies. That is a time bomb ticking away under not only the whole structure of housing, but the wealth and strength of the economy, so I believe that the Government must give it urgent consideration.

Mr. Malcolm Bruce: I say at the outset that my party and I welcome a number of measures in the Budget, not least the ambitious welfare reform package and the important reforms in macro-economic policy, such as the fiscal responsibility legislation, for which we called—it is designed to complement the operationally independent central bank, about which the Conservatives seem to be more than a little confused. Nevertheless, I

hope that the Government will understand that my speech, inevitably, will concentrate on our concerns about the Budget, particularly about the funding of public services and the weakening in Labour's position on the environment.
The extra money for education and health was little and late. I do not believe that it will prevent an increase in hospital waiting lists and class sizes. Even if it does, the way in which it is targeted means that that can be only at the expense of other important aspects of health and education, as the extra money was offset by an upward revision to inflation—the gross domestic product deflator. That will mean a real-terms cut in public spending next year of about £750 million, which cancels out nearly all the extra money for health and education.
That extra inflation—combined with the black hole that we identified in last year's Budget as being caused by higher inflation—has resulted in a real-terms cut of £6.8 billion in the public spending plans for 1998–99 in comparison with the original forecasts of the right hon. and learned Member for Rushcliffe (Mr. Clarke), to which the Government claim to adhere. The Red Book confirms that we were right to claim that the Chancellor of the Exchequer is building a huge war chest of funds, and that cyclical adjustment does not change the vast size of that war chest.
The Budget is bad for the environment, especially as the Government have backslid on their CO2 reduction target. There is neither an energy efficiency scheme nor a carbon tax, and the fuel duties are still being used simply as a tax increase, with no switch from excise duty.
Of course it is good that the Government have at last come clean and produced estimates showing the cyclically adjusted current balance—we have been asking for that for months. In effect, that represents the Government's estimate of the war chest of cash surplus that will result from their borrowing rules.
As a result of incorporating the Tory spending plans in their previous Budget, the Government have produced new cyclically adjusted projections of their fiscal position that give a war chest of cash of some £123.4 billion over the five years 1998–99 to 2002–03. That excludes our claim—which the right hon. and learned Member for Rushcliffe has confirmed—that many of the Chancellor's economic assumptions are deliberately cautious, so that he can disguise the size of his war chest. That figure of £123.4 billion is almost exactly the same as the figure— £124 billion—that was calculated by the House of Commons Library in January, which the Government sought to refute.
The Chancellor still seems determined to hide the size of his war chest, even though the figures are available for everyone to see. Excluding the windfall tax, it is assumed that the public sector borrowing requirement will fall by only £1.1 billion this year to £3.9 billion, and by a mere £2.2 billion in 1999–2000, to £1.7 billion. In the 1997 Budget, the PSBR was expected to fall by £17.7 billion between 1997–98 and 2000–01; now, the assumed fall in the PSBR is only £7.9 billion over the same period. Those figures may be found in table 1.2 on page 11 of the Red Book.
What are the reasons for that? Table 1.2—the first main table in the Red Book showing the PSBR—assumes that the war chest is already being spent. Tucked away in note 3 is the admission that the growth of public spending that


is assumed in the table is 2¼ per cent. per year in real terms, which is fully three times the rate that was allowed for in the Tory spending plans—it raises the PSBR by £4.5 billion in 1999–2000, and by £9.1 billion in 2000–01.
The Chancellor may want to treble the growth rate that was assumed in Tory spending plans—indeed, some hon. Members may think that a reasonable option. However, he should not in such an underhand way massage down the PSBR and distort discussion of the options that are open to him. Indeed, we have been trying to have an honest and open debate about what is available and what options and priorities should be reasonably pursued—we should not let the Chancellor control the process entirely, without, it seems, consulting the Cabinet or his party, let alone the wider public or the House of Commons.
We believe that the Chancellor continues to take an extraordinarily pessimistic view of revenues. We noted in November that he had attempted to massage down VAT receipts—the hon. Member for North Durham (Mr. Radice) will recall that we had an exchange about that in the Treasury Committee, of which he is Chairman—by having the National Audit Office rubber-stamp his decision to assume that VAT receipts as a proportion of consumer spending would fall, although that contradicted an effective Customs and Excise equation showing that VAT receipts would rise.
On page 118 of the Red Book, the Treasury is forced to admit that
it seems likely that the ratio of VAT receipts to consumer spending has increased in 1997–98
Nevertheless, its projections continue to assume a modest downward trend in the VAT ratio. Income is rising, but the assumption is—despite experience to the contrary— that income will fall. If that assumption were corrected and the figures predicted by the Customs and Excise equation were accepted, we should find that VAT receipts alone would provide some £3 billion extra to the war chest by 2002–03—some £8.2 billion extra over the period from 1998–99 to 2002–03.
The Budget includes a further adjustment of the GDP deflator for 1998–99, from 2¾ per cent. to 3 per cent. As I said, that cuts the real value of public expenditure by £750 million for 1998–99. Because of an additional upward revision to the GDP deflator for 1996–97, the real value of planned public expenditure in 1998–99 is now £1.4 billion less—in constant 1995–96 prices—than was estimated in November.
The £5.4 billion black hole in public spending for 1998–99, which we were the first to identify, has now grown to £6.8 billion. If one compares the new public spending plans with those set out by the right hon. and learned Member for Rushcliffe—even taking into account the Chancellor's extra cash allocations—one finds that Labour plans to spend £6.8 billion less in real terms in 1998–99 than the previous Government planned in their final Budget. The Chancellor's public spending plans allow for no real-terms growth in public spending for the three years from 1995–96 to 1998–99.

Mr. Ian Bruce: Is not the hon. Gentleman being too generous to the Government? Surely all the figures assume that public sector employees—such as those who work in education and the health service, both of which

we want to expand—will accept a pay rise at the rate of inflation rather than the real rise that people who work in the rest of the economy are enjoying.

Mr. Malcolm Bruce: The hon. Gentleman anticipates the development of my speech. I am explaining what the figures suggest, although I am not sure whether things will turn out that way in reality. I say as an aside that it is unreasonable for a Government who say that they are committed to the development of education and health to deny the people on whom those services depend a real increase—or, indeed, even a maintenance of living standards—when the economy is growing. That is unlikely to be sustainable.
The Chancellor has not kept to his pledges. The Labour manifesto said:
For the next two years Labour will work within the departmental ceilings for spending already announced.
That pledge was broken in 1997, when Labour reallocated moneys within budgets. We have no quarrel with that, as we pushed the Government to do it, but they broke a specific pledge.
In November 1997, the Chief Secretary made another pledge that has been broken. He said:
The Government are committed to holding to the Control Totals for 1997–98 and 1998–99."—[Official Report, 13 November 1997; Vol. 300, c. 622.]
Yesterday, the Government had to acknowledge that public finances for 1998–99 are so tight that they have increased the 1998–99 control total by £1.5 billion, using a carry-over from 1997–98 caused by slower growth. That is not necessarily wrong, but it makes a mockery of the Government's claim that they are sticking to the established spending plans. In reality, there has been a continual redefinition of Labour's election pledge on spending, demonstrating how ridiculous and arbitrary the whole process has been.
Only an extra £500 million has been allocated to the national health service in 1998–99: much less than the £2.25 billion identified in our alternative Budget. [Laughter.] Hon. Members may snigger but, when he was Chancellor, the right hon. and learned Member for Rushcliffe chided Labour for not having the courage to produce an alternative Budget, which the Liberal Democrats have consistently done. He said that any Opposition worth their salt would produce alternative proposals, but of course the Conservative party has not done so, now that it is in opposition.
Taking the GDP deflator effect into account, the Budget is worth only about £400 million more for the national health service. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) put his finger on it. Given the huge pressures from the recent below-trend funding for the health service, and the millennium computer problem, which will definitely prove serious for the national health service, the extra funding is entirely inadequate to substantiate the Government's claim that they will save the service and deliver a cut of 100,000 in hospital waiting lists. We do not think that that Red Book promise is likely to be fulfilled. If it is, it can be only at the cost of severe cuts elsewhere in the NHS, with damaging consequences.
With the higher inflation expected in 1998–99, the NHS will receive only about 2.5 per cent. more in real terms. Under the Conservatives, the average real-terms increase was 3.1 per cent., although the last two years were not


quite so good. The present Chancellor, in his 1988 autumn statement response to the then Chancellor, Nigel Lawson, said:
Opposition Members welcome any additional resources for the National Health Service and any plan to break down the appallingly high waiting lists. However… When health costs are rising faster than even ordinary inflation, the sum that the Chancellor has provided today will barely cover the basic inflationary pressures that the health authorities face, far less deal with their huge backlog of structural repairs."—[Official Report, 1 November 1988; Vol. 139, c. 826.]
We expect waiting lists and waiting times to go on rising, breaking Labour's early pledge, which in any case has become merely a long-term aspiration.
The £2 billion extra that the Government boast will be spent on health is to be spent over two years and, taking inflation into account, represents only about £650 million more than the Tory plans. Judging by his outbursts, I know that those figures and that analysis have irritated the Prime Minister. He seems to take the view that the Government live in a changing world where figures can be adjusted, adapted and updated, but that Opposition parties cannot respond in kind.
If the Prime Minister wants to compare like with like, he might consider that the Labour party's pledge for spending on health and education, at the time of the general election, was for £100 million on each. We welcome the fact that the Government have approved that spending, but it is not enough to deliver on their pledges.
The Budget announced £250 million extra for education, £100 million of which is to be directed towards tackling skills shortages in key areas and promoting lifelong learning. Those are worthy aspirations, but schools are to receive only £100 million extra. Taking the deflator into account, the Budget gives education a net real addition of only £150 million.
That cannot reverse the decline in the percentage of GDP spent on education under Labour, in breach of its manifesto commitment. The manifesto said:
We will increase the share of national output spent on education",
but planned Government spending on education as a percentage of GDP is set to fall, from 4.5 per cent. in 1996–97 and 4.4 per cent. in 1997–98 to 4.3 per cent. in 1998–99. That is simply a betrayal of the manifesto pledge.
The additional funding is woefully inadequate. It will not tackle immediate needs and certainly has no real ambition for a Government who claim that education is their top priority. The Government talk about £2.5 billion extra for schools, but that is what they propose to spend over the entire five-year Parliament, when they should spend it this year if they have any ambition to deliver quality education.
Not only the Liberal Democrats have spotted the Government's U-turns on the environment. On Budget day, Charles Secrett, executive director of Friends of the Earth, said:
This was a major missed opportunity. Labour is rapidly forfeiting its claim to be a green government … this Budget is about as green as a smog alert. The Government cannot meet its manifesto and Kyoto promises with this Budget.

Friends of the Earth was offended by the Government's U-turn in committing themselves only to the European Commission's 8 per cent. carbon dioxide emission reduction target by 2010, rather than to the 20 per cent. target in the manifesto.

Mr. Bercow: The hon. Gentleman appears to endorse the comments of Friends of the Earth, so we could be forgiven for thinking that he believes that the Government did not increase road fuel duty enough. Will he clarify whether the Liberal Democrats support the increase in road fuel duty or believe that it was too little?

Mr. Bruce: Like the hon. Member for South Dorset (Mr. Bruce), the hon. Gentleman anticipates my speech. If he has a little patience, he will get the answer.
The Government made a clear promise to produce a Green Book alongside the Red Book. The Financial Secretary repeated it when she said:
We have every intention of keeping that promise from the first full Budget."—[Official Report, 10 July 1997; Vol. 297, c. 1062.]
That commitment seems to have re-emerged as a single green page—page 78—in the Red Book.
The Budget contained no serious environmental measures: no carbon tax or home energy insulation scheme, and a cut in VAT on home energy insulation materials limited to certain Government grant schemes. That may be welcome, but it is very small.
The Government have made proposals to reduce vehicle excise duty for fuel-efficient cars, but those proposals are still on the drawing board. The Government propose a reduction of £50 per annum, which is probably not enough to make much difference. According to the Red Book, the Government are "interested in introducing" a lower rate for the least polluting cars. That is a very vague statement.
The Liberal Democrats proposed recycling money from higher petrol duty into cuts for smaller-engined cars. Had the Government made that connection, we might have taken a different approach to that aspect of the Budget. However, the Government have done nothing in that direction—they have merely talked about it—and they have increased fuel taxes by an extra £1.1 billion in 1998–99 or £3.3 billion over three years. That is simply a blow to rural motorists and a tax for everyone, and there are no offsetting fuel efficiency incentives or, as we would wish, tax cuts elsewhere.
I should like to clarify the situation for the hon. Member for Buckingham (Mr. Bercow), following his intervention. We Liberal Democrats have a rule in our environmental tax policy that environmental taxes should be offset by corresponding tax cuts elsewhere. Under the Conservatives and now under Labour, such measures are simply another way to raise taxes and pretend that they are being green. We do not support such deception.
The extra £500 million over three years for public transport is welcome, of course, but it will not revolutionise our transport system, and I doubt whether it will offset the cuts in local authority transport budgets. Today, £4.5 million of rural initiatives was announced for rural transport in Scotland. People are pointing out that local authorities do far more than that to support rural transport, and it is not at all clear whether those initiatives can make a difference. I urge people to bid for the schemes but, if they are successful, to put pressure on the Government to put in a lot more before too long.
As time is pressing, I must say that we welcome the welfare reform package, but are disappointed that nothing is being done for pensioners-not only we, but pensioners, are disappointed. We commend to the Government our proposals, which would not deal with the whole problem, but giving an extra £5 per week to those over the age of 80—up from the present derisory 25p— would at least show a commitment to helping the most elderly and vulnerable pensioners. We shall want to probe the details of some of the other measures in the Budget, but we genuinely applaud the Government's direction and hope that the delivery will match the rhetoric.
The £ 1.4 million for working families tax credit is a substantial injection, but not everyone will be better off. Indeed, the Red Book points out that the number of families with high marginal deduction rates of 60 per cent. or more will increase by 33 per cent., to more than 1 million, which demonstrates the difficulties when one moves the thresholds. One may help people at the bottom end, but unfortunately one creates another category that needs help further up the scale. I hope that the Government will ultimately find ways to deal with that. When we debate the l0p rate of tax, we might be able to engage on more efficient ways to help people on low incomes.
At this stage of the Budget, it has to be said that there are some losers, for example, a married man with no children will lose part of his married couple's allowance with no corresponding benefit, but Budgets do not please everyone, I guess.
There are concerns about how fraud can be avoided and how the working families tax credit will be evaluated. It has been suggested that people might get round the system by taking in each other's children and finding a way to claim benefit in that way.
Finally, on a macro-economic point, I found the exchange on exchange rates interesting. The right hon. Member for Wokingham (Mr. Redwood) clearly enjoys opposition. He has a talent for it—after all, he only has to attack. He is not so good at telling us what he would do. How cheerfully the right hon. Gentleman disowns the Conservative party's policies both in government and in opposition. Obviously, he has been practising for opposition for the past 10 years. He opened his comments by saying that the exchange rate was too high, but gave no idea of how the Conservatives would bring it down. He tried to explain that they would not have got there in the first place.
The right hon. Member for Ashton-under-Lyne hit on the one issue that the right hon. Gentleman ignored, which is the euro effect. That we are not committing ourselves to the euro is an additional factor that encourages people to hold sterling and to force it up. I would not have expected the right hon. Member for Wokingham to endorse that policy, although I was interested that the right hon. and learned Member for Rushcliffe was not keen to answer my question about the operation of the independent central bank either. On that issue, the Conservatives would do best to keep quiet. Being the party of devaluation is a new role for them.
We want sensible economic policies, to provide stability in the long term. I plead with the Government seriously to consider a clear timetable for British entry

into the single European currency, as that would do more than anything else to give manufacturers confidence. It would do so for two reasons. First, it would almost certainly reduce the immediate pressure on the pound and, secondly, in the long run, it would reduce the exchange rate risk for 60 per cent. of our foreign trade—something that seems to be lost on the Conservative party, or at least on its official leadership.
We shall support some aspects of the Budget, but it has a big hole at its heart, and the Government will not deliver on health and education unless they are prepared to tackle that.

Mr. Giles Radice: The right hon. and learned Member for Rushcliffe (Mr. Clarke) made a characteristically sturdy speech. Indeed, he showed why it was a mistake for the Conservative party not to have elected him as leader. He was a little reticent about his contribution to the overheating of the economy before the last election—I chided him about that before that election—but he certainly showed up the right hon. Member for Wokingham (Mr. Redwood). I give the right hon. Gentleman some advice—the shriller the tone, the less likely he is to be listened to. In the long term, the right hon. Gentleman's knockabout stuff will not do. It may be all right for a couple of years of opposition, but it is not persuasive, and he will have to do better.
I agree with the hon. Member for Gordon (Mr. Bruce) and my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) about a single currency. However, some of my hon. Friends will be glad to hear that I shall not follow that line tonight as I want to concentrate on the Budget.
This is a good Budget, and it deserves the widespread praise that it has been given. To begin with, it has proved that consultation is a good idea. The pre-Budget report and the consultation that followed it improved a couple of measures. First, it made individual savings accounts a more effective system. The Government can no longer be accused of retrospective taxation, as they might have been had they not listened to the consultation. Secondly, the new working families tax credit has answered some of the criticisms of the right hon. and learned Member Rushcliffe precisely because there has been a debate about the issues and the Chancellor has answered most of the questions. That is why it will be an effective system. More generally, it is better for the Budget process to be open and for there to be a system whereby one can discuss policy details before those policies are announced. That is a plus and a good thing for our policy making.
I welcome some of the supply-side measures that the Chancellor introduced. I welcome the fact that he has managed a significant redistribution between the better and the worse-off without clobbering the middle classes, which is what people in some Conservative newspapers feared. I also welcome the fact that he has introduced measures to make work to work and employment pay— the working families tax credit, the reform of the national insurance contribution and the expansion of the new deal—and that he has helped children through the promise to increase child benefit next year and the extra help for younger children in poorer families. Incidentally, and sotto voce, the latter compensates for what happened with lone parent families before Christmas and I also welcome the Budget for that reason.
The Budget also contains extremely useful increases for education and health on top of the increases already announced for 1998–99. At times, the hon. Member for Gordon has been churlish about those increases, because they are a good sight larger than we promised and we shall be doing that in every Budget. The fact that a war chest is being built up at least means that there will be extra resources for health and education in every Budget. The hon. Gentleman should welcome that rather than rubbishing it.
The economy faces an uncertain outlook, hovering uneasily between overheating and recession. There are inflationary signs, a tightening of the labour market, and shortages of skilled workers. The Budget forecasts 3 per cent. inflation during the year. On the other hand, a slowdown in the economy is forecast; it is down by 0.25 per cent. on the pre-Budget forecast. That has been caused by the interest rate hike and budgetary policy but above all by the 25 per cent. rise in sterling. There is also the possible impact of the Asian crisis. It is an uncertain situation. Added to that, we have two economies: a depressed manufacturing economy and the service economy, which is still expanding. An interesting graph in this month's Goldman Sachs report shows that clearly.
How is the Chancellor reacting? He believes in long-term stability, which is a worthy objective, given what has happened in the recent past. We all remember the Lawson boom, which led to the Major-Lamont recession. The right hon. and learned Member for Rushcliffe remembers it well because he had to clear up some of the mess. It is right to want to get rid of stop-go and to turn our back on fine tuning, and I have heard the right hon. and learned Gentleman say that.
I support giving the operation of monetary policy to the Bank of England because, in the end, I do not think that politicians can be trusted. Even the right hon. and learned Member for Rushcliffe could not be trusted in the run-up to the general election. He knows that he should have put up interest rates, but he did not. It would have been done if the Bank of England had been in charge.
The Chancellor has imposed on himself the code for fiscal stability. First, there is the golden rule of borrowing only to fund investment. The second rule is that debt should remain at a sustainable level. Those are sensible rules. The Chancellor has been criticised—we have heard echoes tonight—for not taking enough out of the economy, for not having done enough to help the Monetary Policy Committee. We must examine that. The right hon. Member for Wokingham made that criticism, but he was clearly trying to evade the issue. He attacked the Government for increasing taxation but he also said that the Government had not taken enough out of the economy. That was a weak argument. As the Chancellor has said, there has been a 2 per cent. fiscal tightening over the past year, the biggest tightening of fiscal stance since Geoffrey Howe's 1981 Budget.
Part of that is the tightening that comes at the top of the cycle, when more VAT comes in. Interestingly, self-assessment has produced more money for the Treasury. As someone put it euphemistically, people have taken the opportunity to bring their affairs up to date. I do not know what they were doing before, but it is good news for the Treasury. The Chancellor has imposed consumer taxes, such as the two petrol tax increases, the tobacco and alcohol increase, and the two stamp duty increases for houses costing more than £250,000. There is

also the mortgage tax relief reduction announced in July, which takes effect on 1 April, and the reduction of married couples' tax allowance from 15 to 10 per cent., which comes into effect next year.
Added to those taxes, there is a very tight position on spending. The hon. Member for Gordon accepted that. We have stuck to Tory spending plans in a way that no one expected us to—no one thought that it was possible. I hope that that means that we shall have a lot to spend in future, but we cannot be accused of having too lax a fiscal stance now. If we had taken the advice of some City columnists and some speakers tonight and put more taxes on the consumer, we could have plunged the economy into recession. The Chancellor was right not to do that.
To some extent, that policy leaves the strain on interest rates and the decisions of the Monetary Policy Committee. I support that idea. We have already rehearsed the difficulties that the committee faces with the economy overheating but also showing signs of going into recession. It is not surprising that that should produce divisions in the new committee. It is good that they are out in the open, so that we can read about them. They are in the inflation report and the minutes that are published six weeks after every meeting. I think that they should be published one week after. The delay is an unnecessary block to our knowledge.
There are three points of view in the debate. One lot argues that priority should be given to the danger of inflation and that interest rates should rise immediately. They are the hawks. Another lot—I think that it comprises only one person—says that the greater danger is tipping the economy into recession and that there should be no rise in interest rates. The third argument is the most difficult to sustain: the committee should give priority to the dangers from inflation but should wait and see. That is wrong because if, according to the inflation report, there are really dangers from inflation, the committee must act now. It will get into the worst of all worlds by waiting and seeing. That would mean only that those who wanted to hold sterling would buy even more and the pound would go higher, which, as everyone agrees, damages manufacturing industry. It may also mean that we would need higher interest rates later. We may have to do more later and so increase the danger of a so-called hard landing. We want to slow down the economy enough to slow inflation, without tipping it into recession. That is the trick.
It may be that, in April, the committee will say that recession is more likely and that inflationary pressures are being damped. However, if it really decides that the dangers lie more on the inflation side, it should put up interest rates and make people understand that interest rates will not rise further. That would be doing a service to the country and the economy.
This is a an excellent Budget. It is the Chancellor's second skilful Budget. I welcome the supply-side measures. If we are to get their full benefit, the policies need to be sustained by an appropriate macro-policy. The Chancellor has done his bit; his policies now need to be supported by wise decisions by the Monetary Policy Committee.

Mr. David Davis: It is a great pleasure to follow the hon. Member for North Durham (Mr. Radice). If I may return his slightly


back-handed compliment to my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), it is only a pity that he spoke from the Back Bench rather than the Front Bench. No doubt, that will come.
The hon. Gentleman made again the much-reiterated point that the Budget was originally billed as a once-in-a-generation, radical, reforming Budget. I believe that it is somewhat less than that. Indeed, given the comments of the hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) in a rather good speech, it will have less long-term impact than, for example, the early Geoffrey Howe Budgets or—I shall ignore his embarrassment—those of my right hon. and learned Friend the Member for Rushcliffe. Not only that, but what long-term impact it has will not necessarily be all good—anything but.
I do not wish to be over-harsh about the Budget, and I recognise that there are some commendable aspects to it, on which I shall speak shortly. I shall focus on employment and, in particular, the central policy proposal in the Budget—picked out by the right hon. Member for Ashton-under-Lyne (Mr. Sheldon)—the combined reform of national insurance, tax rates and benefits in an attempt to improve the incentives to work and to escape poverty.
That reform is not cheap: the first year of its operation will probably cost about £2.8 billion and the cost seems likely to grow thereafter. However, the unemployment trap and the poverty trap are undoubtedly the plague of modern European economies and it must be right to try to eliminate the monstrosity of people losing more as a result of taxes and lost benefit than they get in pay. The Budget attempts to tackle that and, according to the Red Book figures, reduces by 100,000 the number of low-paid families who face the loss of more than 80 per cent. of increases in pay and by a further 400,000 those who lose more than 70 per cent. All that is to the good—at least at face value—but I shall make some criticisms shortly both of how it is structured and of how it is paid for.
I agree that there is great moral and economic force in reducing the marginal economic taxes facing the poor, but my congratulations are limited and should not give much comfort. We should not miss the fact, already mentioned in the debate, that now more than a million families face marginal deduction rates of more than 60 per cent..—in fact, in most cases, 68 per cent. or 69 per cent.—under the new proposals. On the Chancellor's own figures, the policy puts a total of 250,000 more families in the poverty trap than were there before the reforms. In effect, the wage earner in each of those families, when he looks at his overtime pay, his bonus or his pay rise, must say to himself, "£1 for me and my family, £2 for the Government. £1 for me, £2 for the Chancellor."
That high 69 per cent.-plus marginal deduction, that loss of more than two thirds of poor families' increase in income, applied before the Budget reforms to people on gross pay of up to about £250 a week; now, that 69 per cent. marginal deduction rate applies to families with two children and an income of up to £320 a week. Again, those figures come straight from the Red Book. For those families, the depressing prospect of giving the Chancellor two thirds of any pay increase that they achieve will in future apply to families whose breadwinner, on the basis

of a 40-hour week, earns up to £8 an hour, which is more than double any conceivable or plausible minimum wage level.
Put in simple terms, the poverty trap is being made a little less deep, but a great deal wider. More people will fall in and getting out will be a slightly less steep but much longer climb. All those people—more than a million families—still face that prospect under the new proposals. Few things provide a more dismal demonstration of the depressing arithmetic of the dependency culture than that reform. Those high rates of withdrawal are, of course, a disincentive to work and we face them for the foreseeable future under the Government's strategy. The reasons are hard and uncomfortable and are demonstrable by testing the working families tax credit strategy against its numerical limits.
High benefit withdrawal rates arise from two factors: high means-tested levels of benefit for the poor and low differentials between benefit levels and average earnings levels in society at large. Unless there is a massive change in the basis of our taxation, it is reasonable to assume that means-tested benefits to a worker on average earnings are zero; anything more than that creates a ridiculous dependency arrangement. That is true in most western societies—for example, the American earned income tax credit, on which the Government have based their policy, falls to zero at almost exactly the American median earnings. That means that the maximum range of income over which benefit is withdrawn is the difference between the earnings level from which the credit starts to be withdrawn, which the Budget proposes should be £90 a week, and the average wage, which in Britain today is about £370 a week. A family with two children receives £78.50 of working families tax credit. If the taper were extended right up to £370 a week, the net effective withdrawal rate would be 28 per cent. which, when added to tax and national insurance contributions, would give a withdrawal rate of 61 per cent.
What I have described would be hugely expensive, would drag more than half the population into the benefits system and would still have a withdrawal rate of more than 60 per cent. In other words, the laws of arithmetic— I have used nothing else—virtually dictate that, under the system that the Government have designed, the total tax and withdrawal rate for poor people cannot get below 60 per cent.; therefore, the strategy is flawed.
There are possible solutions. One is to allow the differential between average incomes and benefit levels to widen, but that is unlikely to commend itself to the Government. The second theoretical option would be a massive redistribution using higher taxes on the top half of the population to reduce them on the bottom half, but Labour tried that in the 1970s and it did not work. Finally, the Government could attempt to reduce underlying income tax rates in general by transferring the tax burden to indirect taxes, but they clearly do not intend to do that, as the Red Book shows the percentage of gross domestic product being taken in income tax climbing from 9.5 to 11 per cent. by 2002—by far the biggest proportion of the increasing tax burden is to be raised in that way.
Without any of those changes, it is impossible to get marginal deduction rates for a million poor families below 60 per cent., so while there are good aspects to the


changes, which I hope that I have picked out, the overall strategy is certainly very limited and potentially fatally flawed, because it will not deliver enough in the long run.

Mr. Jim Cousins: The right hon. Gentleman sets out an undoubted problem, but does he not regard the situation that he describes as being far better than a situation in which 750,000 people keep 7p in every extra pound because the marginal withdrawal is 93 per cent. and a further 650,000 people are better off if they stop working? That is the inheritance from his Government.

Mr. Davis: The hon. Gentleman's figures do not tally with what appears in the Red Book—the 7 per cent. gain is certainly not right. What I am trying to point out is that, although some of the work in reducing the very high levels of withdrawal affecting around 100,000 people is worth while, the rest of the exercise has been to trade away the rights of a further 250,000 people by pulling them into the poverty trap. That cannot be a good long-term strategy.
Working families tax credit is based on the American EITC. It would be wrong of me to leave the subject without flagging up some critical practical problems that afflict the policy where it has been used, even though my right hon. and learned Friend the Member for Rushcliffe has already mentioned some of them. In America, the EITC is known for its administrative complexity, its weakness as an incentive provider and its proneness to fraud—it is the most fraud-prone benefit in the United States. Those three weaknesses are intertwined: complexity of the policy leads to administrative weakness, which leads to policy failure and to fraud. In this country, fraud takes between 6 per cent. and 16 per cent. of any welfare budget other than pensions, which amounts to between £4 billion and £5 billion of taxpayers' money lost each year. It would be a tragedy if, on top of its other problems, that problem were to afflict the WFTC as well.
The arguments on that subject in the Budget papers are very thin indeed. They recognise the problem, but do not make it at all clear how the complexity, delay and fraud issues are to be addressed. My right hon. and learned Friend the Member for Rushcliffe has pointed out that the apparently long delay between now and the initiation of the policy will probably not be enough for the tax authorities to deal with all the issues.
I have long argued that it is necessary to design fraud out of welfare systems at the point of policy creation. That does not appear to have been done yet, but it is vital even to the partial success of this policy that it be done. Therefore, I hope that the Chief Secretary will tell us how he intends to achieve it when he winds up the debate.
I shall return briefly to the funding of the reforms and to the macro-economic impact of that funding. To a large extent, the reforms have been funded in the medium term by the cash-flow effects of tax changes to the corporate sector. It is now widely understood that one impact of this and the previous Budget has been to damage pensions and savings—and incentives to pensions and savings—as well as to damage investment directly. It is no surprise that the impact of the two Labour Budgets, according to Treasury forecasts, is shown as reducing investment growth rates from 7.75 per cent. in 1997 to 3 per cent. by 2000. That is not a very good indicator of investment long-termism; nor will it help fundamental economic or employment growth.
That leads us to a rather awkward weakness of Labour's economic strategy, about which the argument has gone to and fro all evening. Last year, the Chancellor made the Bank of England independent. The primary characteristic of independent central banks is a focus on inflation almost to the exclusion of everything else. That has generally created a better-than-average inflation record in countries with independent banks—but it does not come cost free. All the studies show that such countries have sharper and deeper recessions than do countries with other arrangements. In other words, there are higher unemployment consequences.
The Chancellor has failed to design his Budget strategy in such a way as to take that into account: just the opposite in fact. By funding welfare increases—in effect, by abstracting cash from the corporate sector—he is moving a significant quantity of money from saving and investment into consumer spending. The response of the Bank is predictable. While it is theoretically independent of government, and no doubt calculates its money supply figures carefully, it does not operate in a vacuum and is not independent of what is happening all around it. It is far less likely to reduce interest rates when the newspapers are full of accounts of consumer spending booms. So this Budget is designed to encourage higher interest rates in the long term—with the consequential effects, as several of my hon. Friends have pointed out, on the pound.
As we know, the level of the pound will have a serious impact on manufacturing. My right hon. and learned Friend the Member for Rushcliffe has detailed some of the recent monthly figures. It takes a year or more for hedging and margin-cushioning effects on manufacturing to work their way out of the system. That means that the full impact is by no means yet visible. There may turn out to be a very sharp downturn—much sharper than the figures that we have heard may suggest.
Opening the debate, the President of the Board of Trade, in a remarkable polemic, argued that the problem would be dealt with by competing on quality. British industry has done a remarkable job of improving quality over the past 18 or 20 years, and that does not owe a great deal to any Labour Government. However, all our competitors also compete on quality. Where there are two quality competitors, the lowest price will win. That is a fact that our engineering firms understand all too well; I hope that we shall not suffer because of it in the immediate future.
Both this and the previous Budget have had the advantage of five years of economic growth greater than that of any comparable European country—twice that of France and Germany. We have also had the advantage of inflation and interest rates at 30-year lows, and of lower tax and regulatory burdens than those enjoyed by any other country in Europe—in short, the golden inheritance that has allowed the apparently healthy finances of this Budget.
Those finances should not be taken for granted. We have been talking in precise terms of fractions of a billion pounds. If the economy turns down badly, £2 billion or £3 billion surpluses will turn into £20 billion or £30 billion deficits. Unemployment, which was falling by 50,000 a month last year and by 18,000 a month this year, could be climbing by 50,000 a month in a couple of years' time. If that happens, the Budget's arithmetic will fall to pieces.
More than any other country, we in Britain depend on our ability to compete in world markets. Without markets, there are no profits to tax or jobs to take. Welfare to work will certainly fail if there is no work. The Chancellor's golden rule on borrowing would turn to lead in his hands if tax buoyancy vanished and demand-led expenditure soared.
I opened by saying that the Budget was less radical and dramatic than its billing. It would be a tragedy if its principal impact turned out to be the crippling of the economic engine on which all this welfare reform properly depends. The President of the Board of Trade said that this is a Government for the long term. I hope that British manufacturing industry will not have reason ruefully to remember Keynes's comment that, in the long term, we are all dead.

Lorna Fitzsimons: I want to speak in the debate, not because I set myself up as someone who knows much about the economy but because what was announced in the Budget on Tuesday is having a real impact in my constituency. I want to make four points. One concerns the Budget process, which will be crucial to ensure that many people who used not to be enfranchised in Government Budget-making mechanisms now become enfranchised. That will surely be healthier for everyone. Secondly, I want to touch on the gains to poor people on benefits. Thirdly, I want to mention those in the benefit trap—the working poor. Many of my constituents find themselves in that situation. Lastly, I want to discuss small and medium enterprises. I came to the Chamber last Tuesday thinking that at least one of those groups would get something in the Budget. I certainly did not expect all of them—they make up a large part of my constituency—to benefit from the Budget.
The right hon. and learned Member for Rushcliffe (Mr. Clarke) discussed some of the problems that were discovered when we first floated the idea of the working families tax credit. Everyone can say what Canada and the United States do, but the green Budget allows people inside and outside Parliament to debate the merits of what has been learned from other models across the world, and to say how we want to develop our own. That is why we did not end up with a transfer from the purse to the wallet; nor will we end up with some of the worst aspects of the Canadian and American systems. hon. Members need not take my word for this; after all, I am no expert on economics. They have only to read Jeffrey Liebman, the renowned US public policy expert, who expressed the same ideas in the Financial Times last Wednesday. Hence the importance of the green Budget, delivered sufficiently in advance to enable us all to engage in debate, formulate policy and think about the issues.
I have the privilege of chairing the Back-Bench women's group, which felt able to participate in the debate. We welcome the approach that the Treasury and related Ministries adopted to consulting us on the consequences of the policies that they were initiating. The Budget will have a phenomenal impact on women and children—not to mention small businesses. For the first time, we can truly say that, behind the Budget, there

is a genuine understanding of the working lives of women and of child poverty. Child poverty is our direst legacy from the past 20 years. That is why this Budget is phenomenal. It manages not to squeeze people who are trying to do better, and it also manages to redistribute to people who need a helping hand.
The Budget redistributes to parents—single parents or couples—who, for whatever reason, want to stay at home, looking after their children, and enables them to do so. The way in which we have increased child benefit—one of the biggest increases in child benefit in two decades— recognises the importance and the cost of nurturing children, and acknowledges the in-built cost of children under the age of 11. That aspect deserves to receive credit, because, as was said when we had the debacle of the single-parent benefit debate, there is an important cost, and a knock-on cost to children, of rearing younger children.
Conservative commentators talk about increasing the poverty trap. Do they really understand what the poverty trap means? In my constituency, it means that people genuinely cannot afford to go out to work because there is no way—because of the way in which the intricate calculations are done in the benefit system—that they can afford to take the job that they are skilled enough and lucky enough to be offered.
With the working families tax credit and all the related help, including the increase in the level above which employers' national insurance contributions become payable, for the first time ever lots of my constituents can afford to stay in work and not penalise their families for choosing to do so. They welcome the moves in the Budget to start to make work pay for the previously work-poor.

Mr. Ian Bruce: I am grateful to the hon. Lady for giving way in such a passionate speech, but I am sure that she would not want to mislead anyone. Apart from the changes to single-parent benefits, which date from April 1998, the changes that the Government have announced will not be made until October 1999. I hope that she will ensure that her constituents realise that they must wait almost until the next century before any of those changes are introduced.

Lorna Fitzsimons: Yes, but no claimant loses anything now, and my constituents would never take lectures from Conservative Members about anything that they did for women and children in poverty. The Budget clearly says to my constituents—they have told me so, because I have had several meetings with large groups of them since the Budget statement was made—that, for the first time ever, the Government are no longer stigmatising them for being in poverty or trying to do better.
Some of my constituents have been allowed a real choice—whether to stay at home with their children or to go out to work. They feel that this is the first time that, in a Budget, a Chancellor has helped them by allowing them to make such a choice.
The other indicative policy change in the Budget was small, but important—the allocation of £10 million to a scheme to ensure that partners of jobseeker's allowance claimants, who previously were unregistered, under the Treasury rules, and in the unemployment statistics, get assistance in seeking work. For the first time ever, the Treasury has recognised that women's patterns of work


very much depend on their partner's pattern of work, and that, if they happen to be a partner of an unemployed JSA claimant, they get no help. There are roughly 11,000 women in that position.
That is one of the single biggest changes in the Budget. It shows that, for the first time ever, we have a Treasury that is no longer, in the glib phrases of some commentators last week, a "boy's zone", but is starting to conduct a gender impact analysis of the—[Laughter.] Conservative Members think that this is very funny, but their Front-Bench spokesperson on women, the hon. Member for Chesham and Amersham (Mrs. Gillan), was desperately trying to say that your Treasury actually invented it, so it is not that funny—you speak with forked tongue. The reality is that, if you are going to laugh at gender impact analysis—

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. I am enjoying listening to the hon. Lady, but may I say to her, I do not have a Treasury—I honestly do not have one—so perhaps she will remember that.

Lorna Fitzsimons: I am sorry, Mr. Deputy Speaker. You will be well aware that, as women make up 52 per cent. of the population, it would be smart to have some form of analysis of how Government policy and Treasury policy affect them. Therefore, although some people would choose to laugh at it, I think this would be a very dim economic thing to do. That is why I welcome the Chancellor's move to change the focus of the Treasury and study the effect on 52 per cent. of the population of the Budget measures.
The measures affecting small and medium employers were very much welcomed. Rochdale—at least the portion of the borough that lies in my constituency—has more than 2,500 small and medium enterprises, the majority of which are small, and they very much welcome the Budget measures.
As most people know, Rochdale has a very strong manufacturing tradition and manufacturing base. Many of the small employers managed to duck the worst aspects of the second recession by changing their business focus to exports. One or two big businesses in Rochdale have been the pioneers of a superb export drive. They used a lot of their clout and a lot of their experience to re-educate many of the small employers into the benefits of exporting. Obviously, they are now suffering because of the strength of the pound, but the thing—

Mr. Ruffley: Will the hon. Lady give way?

Lorna Fitzsimons: No. May I just finish my point?
The one thing that employers are saying to me is, "Can you please get the Chancellor to make more positive statements about the single currency?" That is the point that my right hon. Friend the Member for

Ashton-under-Lyne (Mr. Sheldon) was making. They wanted us to go ahead and make positive noises about the single currency.

Mr. Bercow: rose—

Mr. Ruffley: rose—

Lorna Fitzsimons: I give way to the hon. Member for Bury St. Edmunds (Mr. Ruffley).

Mr. Ruffley: If Government economic policy is so successful, can the hon. Lady explain to the House why manufacturing output has fallen for five successive months?

Lorna Fitzsimons: No. The point that I was making was the point that manufacturers in my constituency have asked me to make to Ministers. Those manufacturers understand the problem that the Government have in terms of the economy and the high pound. They are saying to Ministers, "We want you to make more positive comments about the single currency." The majority of small and medium employers in my constituency are subcontractors to big companies. They will need to be ready to deal with the single currency in 1999, because it will be a clause of their contract to do so—

Mr. Bercow: Will the hon. Lady give way?

Lorna Fitzsimons: No; I will not. This is important.
Those manufacturers will need to be ready, even if we do not join the single currency. They are saying, "If the majority of us will have to be ready, why are we, as a country, not making more positive noises about joining the single currency?" In their estimation, it would make the problem of the strength of the pound less damaging to them and it would give them ease in terms of long-term planning and in their relationships with their banks, their investors, and so on.
All I am doing is passing on a heartfelt message from the majority of employers in my constituency. That message is, please have the confidence to make more positive noises about the single currency.
There have been a lot of good points—

Mr. Bercow: Will the hon. Lady give way?

Lorna Fitzsimons: I will not, because I am just about to wind up.
Eminent Labour Members have made many good points about the strengths of the Budget. I welcome the fact that we have been able to do something about making work pay for the majority of my constituents, and about helping small and medium enterprises. Most of us did not hope to be able to do both in the same breath, in the same Budget, and we are very grateful. We want to work to ensure that the next Budget builds on that success.

Mr. John Butterfill: The Budget is like the curate's egg—good in parts. Some parts are very good indeed; I shall say something about those. Some parts are muddled; others are addled; others are downright bad.
I am worried about the general thrust of the Government's taxation policy. The Chancellor seems to be constantly trying to find ways of raising taxation without anyone noticing. The worst possible example was the advance corporation tax change last year, which attacked the country's pension funds severely. Nothing in the Budget has remedied that.
This time, the Chancellor is announcing nominal reductions in corporation tax rates, but the cash flow changes in the tax system mean that there have been substantial increases in the tax that companies pay.
One aspect of the Red Book and the Budget speech that I find rather sinister is the reference to a review of the North sea oil tax regime. The hon. Member for Gordon (Mr. Bruce) mentioned that matter earlier. There is a real concern that, in looking for ways of raising taxes without anybody noticing, the Government may do serious damage to one of our most important industries. The problem is that the finds left in the North sea are not huge and easily exploitable; they are much smaller, complex oil deposits which are more expensive to mine. If it is much more expensive to operate in the United Kingdom, the oil companies could easily go elsewhere to Uzbekistan or wherever. I caution the Chancellor not to pursue that route because, although it may appear an attractive way of raising moneys in a manner that people will not notice, it will do much damage to the United Kingdom economy in the long term.
The Chancellor introduced one or two welcome measures for small business, and it would be churlish not to welcome them. For example, it is helpful that small businesses will be exempt from stage payments. We also welcome the fact that small businesses will receive 40 per cent. capital allowances in the first year. However, that is not always a tremendous asset—particularly for new and emerging businesses that do not have profits to shelter. Therefore, the impact of that measure will be very much less than the Chancellor would have us believe.
I also greatly welcome the changes to venture capital. I must declare an interest in that subject as I have been an adviser to the venture capital industry for many years—as the hon. Member for Delyn (Mr. Hanson) knows. The Government have made some worthwhile changes to an industry that does a great deal for the British economy. I am particularly pleased about the technical changes to transfer pricing and the enterprise investment scheme improvements. The Government have also introduced a £50 million venture capital fund for universities— although that is a rather small sum.
More important still is the Chancellor's commitment to look at ways of developing share incentives in order to attract executives into smaller, growing companies. A principal problem in the economy is that small companies that need to grow cannot attract quality people. Many such people are comfortably ensconced in their established jobs and do not wish to take the risk of moving to a smaller company, even though they could have an enormous impact on its development. I hope that that consultation will bear fruit in the future.
Unlike my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke), I am keen on the idea of capital gains tax reform, and I have for many years advocated a taper for capital gains tax. It has always

seemed totally mad to have a tax system where the marginal rate of tax is the same for someone who has built up a business over 10 years as for someone who has made an overnight gain on the currency market. That position could not be sustained. Therefore, I believe that the introduction of the taper is worth while.
I have some reservations about the way in which the taper is supposed to operate. I believe that 10 years is too long, because it will hold investment in existing patterns and, in a dynamic economy, we may wish to change those patterns. Another effect of the taper, combined with the withdrawal of indexation, is that some entrepreneurs will pay more than they do under the present arrangements. For example, the withdrawal for non-business assets will reduce by 16 per cent. over 10 years—or 1.6 per cent. per annum—on a flat rate. The real rate is less than 1 per cent. per annum. If we take away indexation, we can see that the situation will be worse than if there were no taper and only indexation.
That is a problem as many of those who invest in developing businesses will not qualify for the business asset criterion. To qualify, people must have voting rights of 25 per cent. or more or they must be employed virtually full time in the business. I hope that the Chancellor will consider this matter in Committee, because some definitional changes must be made. For example, a financial partner will not invest in a business unless he ends up with more than 25 per cent. of the shares, which carry voting rights. That will act as a disincentive for entrepreneurs to bring in financial partners because the Government are, in effect, forcing them to give away more than 25 per cent. of the equity in return for the injection of finance. I am not sure that that is what the Chancellor intended when he drew up the rules. Therefore, I hope that he will consider an arrangement whereby someone coming in as a financial partner to a suitably qualified company will get the benefit of the business asset definition. I believe that the present definition leaves much to be desired.
I welcome the ISA changes and the regime for TESSAs and PEPs. I think that it is as well to thank a Government for changing their mind. It is easy to criticise Governments and say, "You only did it under pressure," but it sometimes takes political courage to admit that perhaps one's first ideas were not correct. It is worth paying credit to the Government for showing that courage.
I had intended to say quite a lot about the working families tax credit, but I do not think that I could improve in any way on the extraordinarily detailed and brilliant analysis of the problem by my right hon. Friend the Member for Haltemprice and Howden (Mr. Davis). The Government deserve some credit for examining the problem and for trying to do something about it. However, they are perhaps open to criticism for rushing in too quickly with a rather poorly thought-out scheme which could lead to all sorts of problems in the future. Apart from the scheme's technical difficulties and the other problems which my right hon. Friend outlined, I think that the Inland Revenue will have physical problems handling the work load. One prays that they do not recruit the people who are coming out of the Child Support Agency scheme.
I do not like the stamp duty changes in the Budget. Many Labour Members will claim that they will affect only the rich, but that is not quite true. The tax will be paid almost exclusively in the south of England, in


London and the home counties where house prices are very high. If you walk out the doors of this Chamber, Mr. Deputy Speaker, you will find that £200,000 will buy only a two-bedroomed flat in central London. It is by no means only the very wealthy who will pay that tax. It will lead to less mobility of labour, which is a real problem.
I am also a little concerned about the niche areas, such as tax relief for overseas giving. That sounds like a lovely idea with which we can all identify, but it means that people will be more inclined to give to charities that are involved in overseas giving and less inclined to give to domestic charities. I must again declare an interest— although it is not a financial one—as I am a member of the board of management of the People's Dispensary for Sick Animals. I predict that worthwhile domestic charities may experience problems when they find that their income has been diminished by the Chancellor's singling out a particular group of charities in that way.
Having said that, my fundamental criticism of the Budget is that it does not address the major problem in the British economy: the level of our interest rates and the impact that that has on the parity of the pound and the competitiveness of British industry and commerce as a whole.
When the Chancellor announced his proposals for perhaps joining the euro at some time, I asked him how he would approximate interest rates. Even though our long-term interest rates have come down a little, they are still virtually double those in the rest of Europe. The approximation of those interest rates is a real problem.
There are two underlying reasons for our interest rates being so much higher than those of most of our competitors. One is that there has been an historic suspicion that British Governments will not, at the end of the day, stand up to the rigours of counteracting inflation, and that, sooner or later, a Government will let things rip a little. There has therefore been a propensity for interest rates to nudge up. The other reason has been the conduct of macro-economic policy. Although the Chancellor has engaged in fiscal tightening over the past 12 months, it has been in entirely the wrong areas—not in the areas that will damp down consumer demand, but in the areas that discourage investment and saving. That gives all the wrong messages.
Unfortunately, those wrong messages which the Chancellor has been giving have not been addressed in the Budget. It is vital that they should be addressed sooner rather than later. If we continue down our present course, we will be in great danger. The Red Book makes it clear that it is not looking for the 3 per cent. level of growth in the economy that this Government inherited—indeed, it admits that next year the rate may be as low as 1.75 per cent. It says—more in hope, I think, than in reality—that the rate will go back over 2 per cent. in the subsequent years, but not much over 2 per cent. for the whole of the predicted life of the Government.
The danger is that matters could be much worse than that. There are already clear signs that manufacturing industry is going into recession, which will inevitably have a knock-on effect on the service sector. Some elements of the service sector are already finding it difficult to compete in overseas markets. We are in danger of a severe downturn in the British economy, with a real prospect of going back into recession in a year or 18 months. I hope that the Chancellor will do something to redress that.

Mr. John Grogan: We have rightly heard much in recent days about the people's Budget, the people's priorities, the people's money and the people's Chancellor. I shall change the focus slightly for a few minutes by examining the effects of the Budget on what the Conservative Prime Minister, Lord Liverpool, referred to in the last century as the people's pleasures. Early in the 19th century he warned his party not to get too involved in the strictures of Calvinism and to leave the people's pleasures well alone. Fortunately, many of the people's pleasures that he sought to conserve are still with us today, and very robust they are—namely, beer and gambling.
I have boasted in the House before that I have more coal mines in my constituency, Selby, than there are in any other constituency in the country. I shall go a step further today and say that there is a greater concentration of breweries in my constituency than anywhere else. In the small market town of Tadcaster, there are three: Sam Smith's, John Smith's and Bass. There are no fewer than 1,700 businesses in my constituency. I have had a chance to visit only 40 so far, but by some miracle of fate I have managed to fit in visits to all three breweries.
Beer brewing and the associated pub trade employ almost 1 million people. The industry can play a crucial role for the Government in helping to implement the new deal. The increase in beer prices by 1p a pint effectively index-links beer duty in line with inflation. That has no doubt been done to protect Government revenues, and if the UK were a closed market, there would be much merit in that. However, what is obviously regarded as a catching-up measure for the Treasury further increases the differential in tax rates between ourselves and France, and produces an even greater incentive for fraud and smuggling.
The 6:1 beer duty differential, which has been increasing throughout the 1990s, is a denial of the European single market. UK duty on a typical pint is now 38p including VAT. The French equivalent is 6p—a difference of 32p a pint. Every day more than 1.4 million pints of beer are coming into Britain duty free from France. That daily invasion is equal to the weekly beer sales of 1,000 small pubs and adds up to a tax loss to the Treasury of more than £235 million.
The Chancellor referred in his speech to the review by Customs and Excise of fraud and beer smuggling. I await with interest the publication of that report, but the plain fact is that fraud and smuggling are rife. Her Majesty's Customs and Excise reports that there is evidence of organised networks that employ mules, or runners, to make several journeys each day to France to buy amounts of beer up to the level of 110 litres. Once back in Dover, the beer is transferred to other vehicles and transmitted onward all over the country.
A recent "Dispatches" programme on Channel 4 suggested that Yorkshire, my home county, is a centre for the bootlegging business. One of the key characters involved is apparently known colloquially as the Slug. As a Government we promised to be tough on the causes of crime. In the Slug's case the cause of crime may well have involved a deeply unhappy childhood, but it almost certainly also involves the massive differential in duty.
Before the election the Prime Minister, in an interview with The Licensee, discussed the merits of an independent investigation into the issue. That was a good idea then


and it is a good idea now. Certain economic models indicate that a cut in beer duty would increase revenues to the Government, because of the effect that it would have on the brewing industry.
As my right hon. and hon. Friends have pointed out, the Budget was historic, recasting the relationship between the tax and benefits systems, making work pay for all income levels and transforming the relationship between Labour and the business community. My right hon. Friend the Chancellor is assured of his place in history, but we on the Labour Back Benches have greater ambitions for him than that. We want him to be up there with the truly great Chancellors, so on top of what he has already achieved, if he could find it in himself to cut the price of beer in the next Budget, there would be no stopping him.
I shall say a word about buses, trains and rural transport. The Budget allocated £50 million for rural public transport and £500 million for public transport generally. That is welcome, but we must recognise that for 30 or 40 years or more, public transport subsidies have been largely weighted towards the urban areas, as opposed to the rural areas. The Tories ruthlessly cut the budgets, particularly in England, of the six passenger transport authorities in the urban areas. Even so, the authorities' budgets dwarfed support for public transport in rural areas.
In an urban area, for example, West Yorkshire passenger transport authority will spend almost £100 million next year on supporting public transport. In neighbouring North Yorkshire, the figure is just £1.6 million. Fares and concessions are much more generous in urban Britain than in rural Britain. That has some perverse effects.
For example, there are seven stations in my constituency of Selby. Instead of getting on a train at one of those stations, some commuters who live in the constituency drive across the border into West Yorkshire every morning, with all the impact that that has on the environment, and get on a train there to make a significant cost saving. Some pensioners retire to the market town of Wetherby, which is just outside my constituency in West Yorkshire, rather than to the market town of Tadcaster in my constituency, simply because of the public transport concessions. The Chancellor's statement was a welcome first step, but there are tremendous challenges ahead for the Deputy Prime Minister when he makes his statement on integrated public transport.
Finally, I shall say a word about the people's money and the exchange rate. The best thing that the Government could do to ease the pressure on the pound is to do everything in their power to make sure that the single currency and EMU are a success for the countries that join in the first wave. As holders of the presidency of the European Union, we have a crucial role to play in the coming weeks. I was delighted to see the positive efforts that were made during this weekend's ECOFIN summit in York.
If the single currency works, interest rates will fall across Europe, output will be boosted and the pressure on the pound and British interest rates will ease. Conversely, if the single currency runs into difficulties, there could be increased speculative pressure on the pound. I hope that

before too long Britain can join the exchange rate mechanism in preparation for a decision on the single currency early in the next century.
I think that the Budget will be remembered ultimately for two things: first, for a rejection of trickle-down economics, or the trickle-down theory, that dominated the previous Government for 20 years. They took the view that to help the poorest 20 per cent. in society we had only to wait for wealth and income to trickle down. The Budget is a rejection of that approach. Secondly, it is a recasting of the relationship between business and the political parties. Now Labour is the party of enterprise and business.
I am delighted that the right hon. Member for Wokingham (Mr. Redwood) is embarking on business breakfasts and lunches. Every English breakfast that the right hon. Gentleman has and every continental breakfast that he rejects will tell the business community that it is now only the Labour party and the Labour Government whom it can trust with this country's economic future. I think that that will be the legacy of the Budget.

Several hon. Members: rose—

Mr. Deputy Speaker: Order. I have no right to impose a time limit, but I would advise hon. Members to adopt a self-imposed rule of eight minutes apiece. If that is adopted, it will be possible to call almost every Member who wishes to contribute to the debate. I am in the hands of hon. Members.

Mr. Ian Bruce: Thank you for calling me, Mr. Deputy Speaker. In the light of your advice, I shall have to speak that much quicker.
I am grateful to be able to take up the remarks by the hon. Member for Selby (Mr. Grogan), who made an extremely good speech. If I may say so—the Government Whip probably noticed this—the hon. Gentleman was somewhat critical of the Budget. However, he spoilt it all by doing the usual bit at the end, showing how sycophantic he is.
I have an opportunity to demonstrate my gratitude to the Labour party. Apparently it sent about 400 people to my constituency to have a south-west regional conference over the weekend. I understand that some Ministers and Labour Back-Bench Members attended it. As none of them wrote to tell me that he or she would be there, I was unable to write to welcome them and to tell them what they should be looking out for.
Whenever I speak in the Chamber, I sense that hon. Members rush to the statistics which set out the wonderful 77 votes that brought me into this place. I am grateful to Labour Members for smiling. It gives me great joy to know that I beat the Labour party by 77 votes.
It seems to me that many Labour Back Benchers fail to understand why they are here. They will probably get on better in their careers if they take on board what I am about to say. We are here, of course, to represent all our constituents. We are here also to hold the Executive to account. There are 17,678 people in my constituency who voted Labour, and in many ways they are more important than the 77 votes by which the local Labour party lost.

Mr. Battle: Next time.

Mr. Bruce: It is always interesting to hear the Minister and other Labour Members say, "Next time." It was always


the Liberal Democrats who used to say that. They thought that they would take five of the seats in Dorset at the general election. The Conservatives went into the election with six seats in Dorset and came out with eight. I have emphasised that there are many Labour voters in my constituency, and I wish to stress that I am in this place to represent all my constituents.
There are 17,678 incredibly disappointed people who thought that the health service would be helped by a Labour Government. Throughout the 18 years of Conservative Governments—there were not 20, but we will own up to 20 if that is wished of us. Perhaps the first two years of the Blair Administration are supposed to be part of a Tory Administration, but I rather doubt that.
Every year of Conservative government showed an increase of 3.1 per cent. above the rate of inflation in spending on the health service. On education, we always did better. Our record on social services and roads, for example, has been of benefit to the people.
We must remember that at every Budget the Chancellor of the day always has something in his gift box. He will say, "Last year, I said that I would spend only this much, but this year I shall increase that spending by £X billion." We have heard from many who have analysed the miserly sum that has gone into the health services in all of our constituencies under the current Administration.
What has local government been given? As for expenditure on education, for every extra £1 that we were supposed to have £1.40 has been taken away from social services, from the elderly and from expenditure on roads. In addition, we have enormous tax rises. Increases of three or four times the rate of inflation are the norm in Dorset.
In some ways, we were looking forward to asking, "If this is a wonderful new reforming Government that will help to create jobs, what will it do for regional policy?" The South Dorset economic partnership has announced that it is closing because it receives no funds to keep it going. That partnership was causing unemployment in the area to decrease month after month. We are starting now to see the turn-round of our economy, but we need the partnership if we are to continue to go ahead.
We have not heard yet how much the defence budget will be cut in real terms. I understand that that is shortly to be announced.
I thought that I would be able to congratulate the Government on one point. I went on radio and said, "It looks very much as if I as a fat-cat business man will benefit from the nice situation of reducing capital gains tax right down to 10 per cent." What did we find? We found that the Government were doing away with the capital gains retirement relief and introducing a 10 per cent. capital gains rate. The Chancellor was saying from the Dispatch Box that he was doing something for small business men when in fact he was increasing the amount of tax that he would take off such people after they had built up their businesses, retired, and sold out. That is an interesting little twist.
What about millennium gift aid? The Government have gone to the lottery month after month, saying, "We have decided that the lottery will pay for this or that Government policy." They are even saying now, "We would like you to give to charity and, by the way, we would like you to focus on education and poverty relief." Bearing in mind their policies, the Government want people to give to charity to bail them out.
I have difficulty in following the logic of many people when they talk about the stability of the pound. The pound that I have taken from my pocket is stable. We can all see that it is stable. If I put it flat down on the Bench, it stays where it is. Things are more difficult if it is placed on its edge. In relation to what is the pound supposed to be stable?
It is useful to look back to the speeches of Lord Shore of Stepney. He always talked very well about these matters. In fact, he had a speech which he delivered regularly in the House. As older Members will say, "If you get a good speech, stick to it." It is interesting that in 1990, when we had just entered the ERM, Lord Shore, as he now is, was predicting everything that is currently going wrong throughout Europe and how we would have to get out of the ERM.
Against that background, the Government are saying that they want to go into the European single currency. Yet they refuse to go into the ERM. People are asking, "How can we keep the pound stable?" Of course we can keep the pound stable if we go into the ERM and insist that our partners help to keep the pound at a stable level.
Why are we not doing that? I would have thought by now that we all understood that the rush to get a stable pound is an illusion. Against what is the pound stable? We can run our economy wonderfully well but what if we decide that we want zero growth? Is that stability? Is zero growth in employment or productivity stability? We are seeking not to have boom-and-bust economics. I understand that and accept that that is something we should be going for. Every time a British Chancellor says, "I'm going for a stable pound," he is saying stable in relation to the deutschmark or the dollar, and that depends on other people and the way in which they keep their currencies going.
One will never achieve total stability in currency, but one has to manage the economy. It was Lord Shore of Stepney—when in this place, and pretty much on this Bench—who said that giving the power to the Bank of England to set interest rates was total nonsense, because bankers can always keep to the narrow requirements of keeping a stable currency, or keeping inflation down, but they do not have the responsibility of managing the economy, which is so important and which the Government gave away almost on day one when they came to power. They believe that they can simply tell people, "It's not our fault that the pound is at an unsustainable level as far as our exports are concerned." They refuse to do anything about it.
What about the change to national insurance? If people pay average wages, they will more or less not be affected, but if they pay above average wages, they will subsidise those who pay below average wages. A Labour Government are suggesting that that is a good idea. I do not understand it, and we need an explanation of what is happening.
The hon. Member for Ealing, Acton and Shepherd's Bush (Mr. Soley) refused to accept that the ratio of taxes to GDP had gone up. He said that that was because of the windfall tax. He must look at the Red Book—the "Un-Red Book" as far as the Labour party is concerned. Even without the windfall tax, taxes have risen as a proportion of GDP and will continue to rise despite the fact that we shall lose the windfall tax from the figures.
What about child care? We all understand that the social security budget needs to be kept under control. I understand why the policy is not coming into effect


until October 1999: the Government do not have a clue how they will introduce it. They say that they will give £5,060 a year—the 70 per cent. of the £7,800 a year that people would have to pay—to pay for child care, when an individual on a 30-hour week at £3.50 an hour will earn only £5,060. The Government will double that amount, with all the additional things in child care.
The previous Government got into a complete mess with the Child Support Agency. I have always said that and believe it to be true, but that mess was not predicted. That was not the criticism of the CSA. [Interruption.] Please look at what happened under the poll tax and the Child Support Agency. Learn from the mistakes that we made when in government. The whole idea that the state will take over child care for low-paid people is a mistake, because we tried to look at it when we were in government, and it just would not have worked.
The test of any Budget is whether it will create jobs. The Government do not even expect it to, yet that is what their policy is supposed to do. The only thing that I can see coming out of it is that nursery assistants in 2000 will have a boom. What about my farmers' incomes? What about the leisure industry, which will have to find the minimum wage? What about the defence industry? The number of its tanks will be halved, which will affect my constituents. What about pensioners, who are totally under the Government's hammer? What about education? Teachers will be sacked soon. What about health? The Government should expand the number of people in the health sector. None of that is coming out of the Budget, and I believe that we should reject it tonight.

Mr. Peter L. Pike: I am glad to have the opportunity to speak in the debate, because, for the first time in 15 years, I welcome the Government's Budget, as it is a change of direction and a positive move for the best. My constituency is in the top five in terms of numbers employed in the manufacturing sector, and a considerable number of my constituents are low paid. In 1983, Burnley elected me—by a slight majority—over the hon. Member for South Dorset (Mr. Bruce). It made a sensible decision.
The hon. Gentleman showed a £1 coin a few moments ago. It was the Tory party that said that it would allow the pound to float. We know what the floating pound did during the 18 years in which the Tories were in office— it sank. I have an old £1 note. Think about what that was worth in May 1979. Compared with the hon. Gentleman's £1 coin, there was massive inflation and erosion of the pound during the Tories' period in office.
The Budget is good for jobs, good for industry and good for Burnley. It is particularly good for the low-paid. It has to be considered with what we are doing on the national minimum wage, which is crucial in an area such as mine. The Budget must also be considered with what we have done about VAT on fuel.
The hon. Gentleman spoke about the national health service and education, and asked what we have done in the 10 months since we have been in office. People outside know what would have happened if a Tory Government had been elected on 1 May last year, and they are glad that we have a Labour Government.
They know what VAT on fuel would have been. Let us remember that, before the general election, it would have gone up to 17.5 per cent. We kept it at 8 per cent., and have now reduced it to 5 per cent. That is crucial to the low-paid and those on low incomes.
I welcome the move to the working families tax credit, which is long overdue. We should have done that many years ago. Many people who are eligible for family credit do not claim it. It has one of the lowest take-up rates of any benefit. It is nonsense to expect people to take up the jobs advertised in the jobcentre and the newspapers if they end up worse off than when they were on benefit. The Budget is a move in the right direction.
The change to child care is long overdue. I welcome what the Government intend to do on that.
The cuts in corporation tax to 30 per cent., and the small business tax to 20 per cent., are welcome. I recognise that we need to have industry and commerce to create wealth for this country so that the Government can have money for the social dividend, to spend on education, the welfare state, the health service and all the other things that we want to see.
Last Wednesday, the Lancashire Evening Telegraph wrote:
But there was a warm welcome from shops spokesman Rita Walsh, who said the Chancellor's measure would put cash into the pockets of the poor, providing a much-needed boost for retailers.
Mrs. Walsh, secretary of Burnley and District Chamber of Trade, said she had expected a balanced Budget, favouring the less well-off, and that is what the Chancellor had delivered.
That is important, as we must recognise that, when the poor get additional money, they spend it, because they need to—they cannot save it. The option for the poor to save is not really there. They need the money. They need to spend it, whether on food, clothing or whatever, to improve their standard of living.
Last Friday, I visited the Potterton Myson factory in Padiham, in my constituency. It has just announced a further 125 jobs as a result of consolidation and bringing some work from Warwick. It is wary about the value of the pound—DM3.06 to the pound makes trading difficult. It is the leading manufacturer in its field in this country, and it wants to be the leading manufacturer in Europe.
Industries in my constituency believe that we need to be in the euro as soon as possible, and they condemn the previous Government for having failed to get us into a position where we could join it at the start. They will in any event have to trade in it, so it is crucial that we join as soon as possible. I visited Smurfit in the afternoon, and people there expressed exactly the same view about the European currency. They are in the paper industry and have to compete with other Europeans, and they think it wrong that we will be left on the side.
One or two Conservative Members have mentioned interest rates. The right hon. and learned Member for Rushcliffe (Mr. Clarke) spoke. I think that he is condemned particularly on two counts. First, he did not move ahead on the euro. I do not believe that he had the power or the ability to do so, because he was a minority voice in his own party. Secondly, there was the question of interest rates. I think that the right hon. and learned Gentleman should have increased interest rates long before the general election. Why did he not do so? Because he put the political interests of the Conservative party above the interests of the country: I have no doubt of that.
I must utter one slight criticism of the Budget. I refer to duty on liquid petroleum gas. Lucas Aerospace, in my constituency, makes gas bottles for the vehicles involved, having developed its process from making cases for the multi-launcher rocket system. It has converted that technology, in one of the best defence diversifications. It believes that the market is growing; it also believes that the Government have failed to provide a sufficient incentive to persuade people to convert to the use of an environmentally friendly fuel. Italy has 2 million vehicles on liquid petroleum gas, while this country has only 2,000.
I remind Ministers that, after the introduction of unleaded fuel in this country, the Environment Select Committee produced a report—it was produced some years ago, under the chairmanship of Sir Hugh Rossi and during my membership—recommending a differential encouraging people to opt for unleaded fuel. In their first Budget, the Government introduced a very small differential. They were condemned by an emergency report from the Committee saying that they needed to do more. They increased the differential, which speeded up the conversion. I urge my colleagues to consider the matter, because I think we should be doing more.
I think it right to move the Contributions Agency to the Inland Revenue. They have been collected together and paid together for a long time, and I think it right for us to merge them in April 1999.
Unlike the hon. Member for Bournemouth, West (Mr. Butterfill), I think that what has been proposed for overseas aid is absolutely right. It is also in line with what my right hon. Friend the Secretary of State for International Development is doing, and demonstrates the Government's belief that, although we must act in this country, we also have responsibilities in the wider world, and are prepared to put our money where our mouth is.

Mr. Howard Flight: I congratulate the Chancellor of the Exchequer on the rhetoric of his Budget, on his press coverage, and on certain measures—particularly the increase in child benefit, which strikes me as a simple move, unlikely to cause fraud, and intended to benefit families.
What worries me is the fact that the Budget was pretty thin on long-term strategy. It was a ragbag of measures. I also fear that, in many ways, the Chancellor has washed his hands of active economic policy. Much has already been said on the subject, but I want to make my point. Effectively, the Chancellor's actions say, "Yes, use the interest rate and the exchange rate as a manager of this economy. Allow higher interest rates and a higher exchange rate to take the strain and cool down the overheating."
That risks causing much the same results as we saw in the early 1980s and the early 1990s. It is also entirely inconsistent with standing up and saying, "This is a Budget for stability—a Budget for exchange rate stability." Sterling will appreciate further, but as and when the United Kingdom moves into recession, as it surely will by 2000, the sterling trade-weighted exchange rate will depreciate, and the exchange rate will be used as the only positive economic regulator.
The Budget also involved acts of what I would describe as disingenuousness—attempts to mislead the public into perceiving something good where there was actually

something bad. Much has been said about that already. It was fine to reduce corporation tax rates, but accelerating payments will cost an extra £4.6 billion through to 2001, which was not so fine. As for mortgage tax relief, we had all forgotten that it had been cut to 10 per cent. only nine months ago.
The changes in capital gains tax have already been mentioned. In my view, they are much more arbitrary than the indexation arrangement that they will replace. There is an alleged new attractive rate for entrepreneurs. As my hon. Friend the Member for Bournemouth, West (Mr. Butterfill) said, most entrepreneurs cannot meet the criteria to qualify. I welcome the further thought that the Government will devote to the matter, but, as the measure stands, it really is empty. As for the changes to bed and breakfasting, I think that they are wrong, and will contribute to inefficiency in capital markets.
I suppose that I should declare an interest as a PEP investor as well as a PEP manager. Let me make just one simple point about that much-discussed subject. After all the hoo-hah, let us remember that it was possible to save £10,800 per annum in combined single-company and other PEPs and TESSAs; that has now been halved. In fact, the Chancellor has been very clever. He has gained credit for not implementing the £50,000 cap, but people have forgotten that the amount they can save has been halved.
Let me return briefly to the point about economic management. In the present circumstances, the only relatively painless option is to encourage savings. It would have been possible, for instance, to encourage building society windfalls to be saved last summer. That is part of the cause of the over-consumption that has got under way. As the Red Book shows, the Government are poised to produce a policy designed to reduce savings.
Let me make some points that have not already been made about welfare changes. I am worried about the way in which the national insurance changes will work. There are bunched areas within the £107 to £450-a-week wages level in which there are disincentives to employing people. I fear that we will follow the pattern of the United States, which will mean a tremendous increase in the number of companies employing part-time workers to cut national insurance costs, particularly as and when the economy turns down. That has happened in the United States for similar reasons. Although, at the lower end, the changes will be enormously welcome in creating jobs, I fear that there will be disincentives further up the line.
Much has been said about the working families tax credit. In certain American states where it appears to have been successful, there has been the stick of no benefits after one or two years as well as the carrot. I agree with other Conservative Members that these measures have been rushed in, in an attempt to copy Clinton, without having been thought through. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) presented the situation brilliantly. He explained that the poverty trap was being increased to the limit with regard to the number of people with a 60 per cent. tax rate poverty trap.
I welcome the aims of the Budget, and hope that they will succeed, but I am worried about the increase of around 800,000 to 1.4 million in the number of people who will benefit under the working families tax credit. That strikes me as contrary to the Government's pledge


to contain welfare expenditure. I am sure that, unless changed, the child care arrangements will naturally result in neighbours using neighbours—after all, people are human—and that the cost is likely to be closer to £5 billion than £1.25 billion a year. That may deserve further consideration before it becomes law.
For many ordinary people, petrol and, for a smoker such as myself, cigarettes are inelastic necessities, and much will be taken in duty on such items from less-well-off people; the net position of many people at the bottom of society will not be much better.
Evidence from the past three years shows that an increasing number of married mothers or mothers who live with a partner want to stay at home with their children as soon as they can afford to do so. As the vicar of my parish church preached yesterday, the Budget is wrong to offer fiscal encouragement to bring up someone else's children. Equality must surely be ensured between the two; children are better off with their mother until they are at least six or seven.
Little has been said about the proposed anti-avoidance provisions. Every business transaction will have to be given anti-avoidance clearance by the Revenue. Canada introduced a similar provision, but its Revenue fibbed when it said that it has only 240 officers: it has 600 highly paid, top men and women, who have to make complicated assessments. Our Revenue does not have such resources, but the last thing that we want is for businesses to move their headquarters elsewhere because of massive complications in securing anti-avoidance clearances on commercial transactions.
There is a crucial difference in Anglo-Saxon culture between avoidance and evasion. No man is bound to pay more tax than he need, but not paying what he should is against the law. In continental Europe, the difference is blurred, and anyone who conducts business there will find that a problem. I believe that there is an element in the Budget, whereby it is suggested that avoidance and evasion are the same. That is unhealthy for this country's commercial integrity.
Other hon. Members have dismissed the point, but I have ground through the figures, and have found that, before the Budget, taking into account the increases in the community charge, an average family has been paying an additional £780 in taxes since 1 May, and the figure has now increased to just over £1,000. I fear that this Government will repeat our mistakes, and that the average family will have a higher tax burden, yet the average family is expected to bring up children properly, set an example, support charities and be leaders in society.
There is no merit in constantly loading taxes on the average family. Benefits must be spread broadly to help the less well-off, and they must be financed from a growing economy, and not by raising taxes on average, ordinary families.

Mr. Malcolm Chisholm: The two central themes of the Budget can be found by focusing on two pages of the Red Book: page 68, which highlights the remarkable redistributive heart of the Budget, and page 83, which describes the primary objective of increasing the sustainable growth rate of the

economy. The former may be more exciting, but the latter is just as important, because the Government's success in increasing the sustainable rate of growth will determine how much we can redistribute and how quickly we can expand public services.
I understand those who want a big-bang approach to public expenditure, but we must never forget the serious structural deficit that we inherited and which had to be dealt with. We shall not do anyone any favours if we increase public expenditure in an unsustainable and economically counter-productive way. I therefore welcome the first-ever framework for monetary and fiscal stability and the Budget's many specific measures to address the under-investment, instability and structural weaknesses that we inherited.
A contrary view to those positions—or, rather, a contrary confusion—was expressed by the right hon. Member for Wokingham (Mr. Redwood), who simultaneously criticised tax increases and advocated even greater tax rises. As Samuel Brittan wrote in the Financial Times,
It is just not realistic to suppose that any Chancellor would increase taxes and pile up cash surpluses because of some highly debateable belief that he would enable interest rates to come down.
It is difficult to be euphoric about macro-economics, so I shall leave the subject, but that word describes how I felt when I heard about the redistributive measures in the Budget. This is the first Budget for 20 years to redistribute towards the poor, especially towards poor families.
That is the exact opposite of what the Tories did for 18 years, under whom families, especially poor families, suffered most. That is clearly shown by a book, "Taxes Down, Taxes Up", which was published by the Institute for Fiscal Studies in 1994. The Chancellor understandably prefers to say that his proposal is a redistribution in favour of work, because those paying tax will begin to do so at 50 per cent. of average earnings instead of at 25 per cent. The changes to national insurance contributions and, above all, the working families tax credit, which contains a child care element, will lead to job creation and increased pay.
I was a little concerned before the Budget about the working families tax credit, and I still hope that the presumption is that it will be paid to the woman in a couple, but we all welcome the massive advance that the changes proposed in working families tax credit represent. It proposes a higher applicable amount than family credit, more support for younger children and a reduction in the problem of steep tapers.
The outstanding problem, as the Government know, is housing benefit. I urge them to make a low-rent policy a foundation of their housing and welfare-to-work policies. That must be their starting point for reform of housing benefit.
The Budget addressed many of the barriers to employment, of which child care was the greatest. This is the first Government in British history who regard child care as an essential part of economic policy as well as of children's policy and of equal opportunities policy. A lone-parent constituent told me a month ago that she had had to give up work because she was on maximum family credit and could therefore receive no child care support. Under our proposals, she and hundreds of thousands of others will have 70 per cent. of their child care costs paid.
Other barriers must be addressed. I welcome the introduction of a training element to the new deal for lone parents. I hope that it can be expanded in accordance with some of the suggestions of the Select Committee on Education and Employment. The gateway and other training, education, confidence-building and support measures should be opened to them.
I also welcome the linking rule, which deals with the work disincentive element of the original lone parent benefit cuts.
Not only those in work will benefit from the Budget. I particularly welcome the income-related benefits that will help children under 11. Recent research suggests that the gap between the amounts available to under-11s and over-11s is too big. The lone parent cuts in income support will be made up by next April, and for new claimants with more than one child under 11, the gap will be more than made up. I welcome the progress that has been made in that regard since December.
The problem that remains, however, is the time lag, and it applies also to lone parent in-work benefits. Changes will be made for lone parents in April, June and November 1998 and April 1999. I make the simple proposal that all the changes should be made simultaneously in April 1999. That would be more or less revenue neutral.
One other group not in work is pensioners. I welcome the large amount of money given to them in the summer Budget, but there is a problem with tenements. In certain Scottish cities, some pensioners have received £10 rather than £20 because of the way in which some tenement addresses are classified. I hope that that will not happen again, and that the Benefits Agency will ensure that the appropriate amount goes to every pensioner.
The Budget is a defining moment for the Government. I welcome its core themes of redistribution and sustainable growth. I am delighted that we are back on course to deliver old Labour objectives in a new Labour way.

Mr. Edward Davey: I want to focus on what the Budget tells us about the future direction of fiscal strategy. Like the hon. Member for Rochdale (Lorna Fitzsimons), I welcomed the pre-Budget report, which allowed consultation before the Budget. The amount of detail contained in the Red Book about the direction of fiscal policy is also welcome and remarkable.
The Red Book gives projections of expenditure and revenue. In his Budget speech, the Chancellor made much of the need to look forward. The proposed fiscal code will make detailed assumptions and projections about public finances. In future, we shall not need to be Mystic Megs to predict what the Chancellor is likely to say on Budget day.
An analysis of the Government's forecasts on fiscal policy shows that there is a positive story to tell. That begs the question why the Government are not taking more action on public services now. If the fiscal projections in the Red Book are correct, in the next three years the Chancellor will be able to say that there is a Budget surplus, that the Government are cutting taxes and that he wants massively to increase spending on public services. That is the message of the Red Book.
The number of sweepstakes on how often the Chancellor will use the word "prudent" in his Budget address will mushroom. He may be prudent in the future, but is his current approach to expenditure on public services prudent? Liberal Democrats argue that the bust-boom approach to funding of public services is imprudent, and will have a detrimental impact on the infrastructure of public services, on the lives of those who use services such as health and education, and on the careers of the professionals working in the services.
Why are the Government taking such an imprudent approach to the management of the public sector? Is it because of their manifesto pledge, about which we have heard so much? As my hon. Friend the Member for Gordon (Mr. Bruce) said, they have already broken that pledge because they have not kept to the agreed departmental ceilings. I believe that the reason has to do with the comprehensive spending review. I am glad that the Chief Secretary to the Treasury is present, because he may want to confirm or deny my contention.
The Government's approach to fiscal policy is based on realpolitik, and has damaging implications for public services. They have said to Whitehall and to the various spending Ministers, "There will be no money for you in the first two years, so you will have to concentrate on your comprehensive spending reviews." That may be a sensible pre-election strategy in the run-up to the next poll, but it is not a sensible way to manage public services.
The figures in the Red Book show that delaying the inevitable increase in funding for public services is unnecessary and ill advised. The Government are being highly pessimistic about the public sector borrowing requirement. Despite massive reductions in the PSBR in the past two or three years, it is projected to be in a small surplus in two years' time. We believe that it is likely to be in surplus next year, and in the following years there will be a much larger surplus than is projected.
The figures represent a large growth in public spending. Obscure note 3 of table 1.2 on page 11 of the Red Book says that public spending growth is assumed to be 2¼ per cent. in real terms. That is three times the growth for this year and that projected for next year. If such an increase in public spending is accounted for by the figures now, why not bring it forward a year, so that public sector managers can plan and invest properly and can make long-term decisions? Public services lack stability because the Government are not investing in them now.
Another reason why the PSBR is so pessimistically projected in the Red Book is that revenue forecasts are ridiculously low. The figures show that Customs and Excise is making incredibly low predictions for future VAT revenues. That may make a difference of more than £8 billion between now and the next election.
There is an assumption that no changes, apart from those already announced, will be made in future tax rates and allowances. As this Budget and the July Budget has shown, that is a highly unrealistic assumption.
Even if we take the Government's pessimistic approach to public finances, the figures predict a huge surplus. Between the financial years 1998–99 and 2002–03, there will be an accumulative Budget surplus of £123 billion. Despite that surplus, the Government are not prepared, for the coming financial year, to provide an extra £1 billion for health and an extra £1 billion for education. Why are


they being so parsimonious when their figures suggest that they need not be? We know why the Government are building up this war chest.
I welcome the fiscal code that the Government intend to introduce, the whole point of which should be to introduce stability in the management of public finances. We support such a laudable aim, but why start off with such bogus and pessimistic assumptions? Governments of whatever colour seem to be depressed and suffering from psychological disorders. At the beginning of a Parliament they are pessimistic about how things will turn out, and in the Budget before the election they become optimistic, and suddenly the growth rate has increased and the PSBR has vanished. We are on some sort of mental roller-coaster, but government needs mental stability. Perhaps that would be slightly more boring, but it would be more honest. The Government should have started with honest assumptions in the Red Book.
I should like to comment on the detail of the proposed fiscal code. The Government derive much of their thinking on the code from the experience of the New Zealand Government's fiscal responsibility legislation. However, they have missed some key elements in that legislation, one of which is vital in the context of the Government's war chest. The New Zealand measure requires the Treasury to publish four to six weeks before an election the assumptions behind the Budget and the fiscal projections. If the Government were sincere about taking politics out of fiscal policy to produce a more stable approach, they would include such a provision. I hope that they will do that in Committee.
When Liberal Democrats comment on Government policy, the Government say, "You are imprudent. It is right for the Government to be cautious. Look what happened to the Tories in the mid-1980s, when they cut taxes in the belief that they had reached fiscal nirvana. It is right for us to get away from such Victorian mismanagement." Liberal Democrats agree that the Government should not repeat Tory mistakes. We call not for £6 billion of tax cuts but for £1 billion to £2 billion extra for the public services now. That is a sensible approach and is not lacking in caution.
The Government are making a serious mistake. Trying to turn round the public services after years of mismanagement by the Tories is like trying to turn the Titanic.

Mr. Ian Bruce: It is like refloating it.

Mr. Davey: I am afraid that the hon. Gentleman is right. The Secretary of State for Health has problems with waiting lists. The pledge to reduce them by 100,000 has not materialised: they have increased by 100,000. Time and resources are required, and if the Government delay investment in the health service, tackling the problems will be that much more difficult. The same applies to class sizes. We should reflect on the day-to-day realities of managing public services. Professional staff are the core of our schools and hospitals, and if they are not properly funded, they will go away and graduates will not go into medicine or teaching. There will be massive recruitment problems.
This morning, at a primary school in my constituency, the head teacher told me about the massive problem not just in Kingston and Surbiton but throughout the country

of recruiting deputy heads and head teachers. Because of the hassle of ever-growing administration, it is not financially viable. If the Government do not invest in our public services, they will lose the support of the staff, the people who make things happen. That is the danger of delaying investment.
On a slightly more positive note, the Government's approach to future fiscal policy by the use of consultation papers and comprehensive spending reviews should be supported. For example, the consultation paper on the reform of the tax and benefits system and the report from the chief executive of Barclays bank contained some welcome ideas. It is clear that the Government took the easy elements of that consultation paper and put them in the Budget, but Mr. Taylor outlined more difficult choices that the Government may have to face. I shall not go into details, but I hope that the Government will allow an early debate on those matters, so that we can get to grips with some of the tricky issues that are well set out in those consultation papers.
It is ironic that although the Government are trying to take a longer-term view of economic policy, have given control of interest rates to the Bank of England, have published a fiscal code and are trying to widen and rationalise debate on economic policy, the Budget is one of the most political Budgets of all time. There were many leaks before the Budget about the possibility of hitting the middle class, but it was not hit. I do not condemn the Government for not hitting it, but those leaks show the political tone and the background of the Budget.
The timing of the tax and spending decisions in the Budget is political. Some of the taxes will hit us now, so that the Chancellor can draw cash to the Treasury's coffers, but spending will occur in three or four years— close to the next general election. Why could not child benefit have been increased from April? The only reason for the delay is the Government's political planning. There are political calculations in the PSBR forecast and in the Government's bust-boom approach to the public services over the life of this Parliament. It will become clear that the Government's political judgment is wrong. It will take a long time to turn round the public services, but the ambition should be to have the world's best public services. The Government say that they have new ambitions for Britain, but they are not prepared to invest in our public services. Their words are hollow.

Mr. Andrew Love: I listened carefully to the closely argued speech of the hon. Member for Kingston and Surbiton (Mr. Davey) and I still cannot tell whether he and his party are optimistic or pessimistic about the Budget. I am optimistic. We have been in government for almost a year, and perhaps this is an appropriate time to take stock of our stewardship of the economy and of the Chancellor's Budget judgment of where we are going.
Everyone has said that the Budget is neutral, and from the achievements so far and from the Treasury projections it is easy to see why people say that. Inflation is at 3 per cent. and is set to reduce to 2.5 per cent. in 1999 and beyond. That is the target range that has been set for the Monetary Policy Committee. The public sector borrowing requirement is £5 billion, which is some £14 billion lower than the figure that was projected by the previous


Government, and it is due to be in balance by the millennium. According to the Red Book, we are well on the way to fulfilling the golden rule of the economic cycle that was introduced by the Chancellor in July.
Growth is running at 2 to 2.5 per cent. and is to be held within the range of 1.75 to 2.75 per cent. over the next two years. That is at or near the trend growth rate for the economy. According to the Red Book, the debt to GDP ratio will be 52 per cent. this year and will decline to 47 per cent. by the millennium. That more than fulfils the fiscal rules that were set by the Chancellor in July. Of course, the Chancellor's fiscal stance is only one aspect of the Budget and in some respects it is not the most important. The Budget is emphatically for jobs and families and it will stand or fall on the Chancellor's judgment about refashioning the welfare state.
The signs are modestly optimistic. The headlines and the editorial comment in the press the day after the Budget were consistently favourable. Even the Daily Mail, which sees itself as the voice of middle Britain, pronounced the Budget "sound and sober". The only body that simply refuses to find anything good to say about the Budget proposals is the Conservative party, which persists with the fiction of a golden legacy, conveniently forgetting that it did not appear very golden to the electorate in May.
Critical to the success of the Budget will be the measures to deal with the poverty trap. I welcome the Chancellor's endorsement of child benefit as one of the pillars of a modern tax and benefit system. He has also reaffirmed that the benefit will remain universal and continue to be paid directly to the parent with primary responsibility for the children. That is all to be welcomed.
Many low-paid families will also benefit from the introduction of the working families tax credit, which will replace family credit and is designed to provide a minimum guaranteed income to families on low pay. In the process, it will turn a benefit into a tax credit and help to overcome the stigma that continues to ensure that around 30 per cent. of people who are eligible for family credit simply do not claim it. However, payment through the tax system brings its own problems, which have been recognised by including an option for the working families tax credit to be paid to either parent.
The third policy change that will boost the earnings of the low-paid is the reduction in national insurance contributions. That is calculated to be worth £65 a year and will benefit a significant number of the low-paid. The combination of all three changes will provide a powerful boost to the incomes of many families, but we have to recognise that the changes will interact with other benefits, notably housing benefit, and that this is but a first step—a radical and imaginative first step—in developing the new welfare state.
I should like to give a special mention to one of the smaller initiatives that is tucked away in the Budget. The announcement of a £50 million venture capital fund will be warmly welcomed in my constituency. The Lee Valley business innovation centre is sited there and, in association with Middlesex university, supports many small businesses in the area. In association with the local authority, the centre is developing a science park. The university challenge fund—to promote enterprise and high-tech growth—is just what it needs to turn scientific discoveries into commercially viable projects. It will help to unlock the talents and ingenuity in our universities and to channel them into the creation of wealth and jobs.
I should like to comment on the Government's long-term ambition to secure economic stability and the role in that objective of the code for fiscal stability. The code will enshrine the need for transparency and accountability in Britain's economic policy framework. It will strengthen the credibility of fiscal and debt management, much as the new monetary policy framework has done for the setting of interest rates. It will be underpinned by detailed reporting arrangements and proper accounting methods. The code demonstrates again the Government's commitment to maintaining and strengthening the credibility of their economic policies.
The Budget is both prudent and ambitious. It creates stability, but begins the task of modernising the tax and benefit system. That purpose is worth supporting, and I commend the Budget to the House.

Mr. John Bercow: The Budget is a triumph of style over substance, yet no hon. Member should doubt for one moment that the substance is deeply damaging—to taxpayers, to country dwellers and to the economy as a whole. In the short time available, I shall deal with each of those three points.
First, let us address the subject of taxation. Earlier in the debate, we witnessed the interesting spectacle of revisionism rampant on the Labour Benches, as Government Back Benchers misrepresented the record of past promises, to distort the reality of what has transpired since the general election. We need to be explicit about what was said by Labour Front Benchers before the election.
The Prime Minister said—it was reported in the Financial Times on 21 September 1996—that there was no plan to increase taxes at all. In April 1997, an explicit statement was made by the then shadow Chancellor that Labour had no public spending commitments that would require extra taxes. Therefore, there was a reference to no plans for increases in taxes at all and a second reference to no requirement for extra taxes. It was not simply a question—as the President of the Board of Trade implied—of a commitment not to raise rates of income tax. The commitment was clear and explicit: Labour said that it had no plans to increase tax at all. Those pledges have been betrayed. That trust has been broken. The Government have reneged on the many words on this subject that were uttered before the general election.
What we know now from the Red Book is that taxes will rise from 38.1 to 40.1 per cent. of gross domestic product by 2002–03. The Budget increases taxes. The Government then positively intend to increase taxes in each and every one of the succeeding four years. That is the plan, and that is the policy that the Government will deliver. It means that the proportion of GDP raised from income tax will rise from 9.5 to 11.1 per cent. Whatever the mirrors deployed by the Chief Secretary to the Treasury in responding to the debate, he cannot gainsay the reality of the written word of the Red Book and the financial statement.
Let it be clearly understood that the Government believe that Britons are taxed too little and should be taxed more. That is what the Government intend. They believe that not only individuals but businesses are too lightly taxed. The first signal of the intention further to raise business taxes came in the Budget, which contains a


net increase in business taxation of £2.2 billion. That will not increase employment, it will reduce it; it will not enhance competitiveness, it will undermine it; it will not make our country more prosperous, it will make us relatively and, potentially, absolutely poorer. Those are the consequence of the Government's policies, even if they are not the intention.
The Chief Secretary should not deny for one moment the intention, set out in the Budget, to increase employer national insurance contributions for higher-paid workers. Earlier, the President of the Board of Trade was challenged to explain how that increase in taxes upon business could help the process of employing higher-paid workers, could assist their retention, and could advance the cause of high-technology and knowledge-based companies in the international marketplace as they seek to develop. Answer came there none, as the right hon. Lady was visibly under pressure, flummoxed and deprived of any coherent answer to the attack that was made. I recognise that the Chief Secretary is an altogether more sophisticated operator, so I hope that he will manage a better reply than the right hon. Lady was able to give.
That is the reality of the increase in taxation, although I readily concede that the Prime Minister was supremely ignorant of the contents of the Budget delivered last week by his Chancellor—an ignorance that he displayed not only in front of the House, but in front of millions of television viewers during Prime Minister's Question Time last week. That is the first criticism we make. Labour has two favourite sports, new Labour as much as old Labour. One is to raise taxes and the other is, by a variety of ingenious means and devices, to create new taxes.
The second criticism, specifically representing the concerns expressed to me by my constituents, is the Government's attack on country dwellers. That comes in the form of a dramatic, swingeing increase in road fuel duty. The Government have imposed an additional burden of £2.75 billion on people in rural communities who drive cars. Let no one underestimate the scale of that imposition. A rural dweller with a car, who has the temerity to drive it 20,000 miles per year—that is not uncommon or untypical—will face an increased burden of £160 per year as a consequence of the Government's measures. That is damaging; it does not provide a work incentive for those who need a car to travel to work; it does not do anything to encourage the inhabitants of rural communities. It is the latest instalment in a systematic and inconsiderate attack by an urban-dominated Government on the inhabitants of our rural communities.
If the Chief Secretary believes that that is amusing, he should think again. The number of times that Conservative Members heard that grievance expressed on the countryside march was too numerous to count. If the urban Minister thinks that that is insignificant, he is insensitive and can in no sense claim to speak for a one-nation Administration.
The Institute of Directors, in its characteristically restrained and understated fashion, said that the two increases in road fuel duty in less than a year were regrettable. How right it was. For the Chancellor of the Exchequer to offer, as a sop to those whom he has just clobbered, a £50 million rural transport fund—supposedly to bolster public transport services in the countryside— borders on an insult. If it is to mean anything, why did he

not set a target for the increase in public transport services that would result from that policy? How many more journeys does he expect that there will be? What decline in the reliance on the car will result from that infusion of funds?
If the Chancellor of the Exchequer and the Chief Secretary cannot estimate what the change in behaviour will be, we can deduce only that they have not got a clue and perhaps do not seriously intend a change of policy. They have patronisingly given rural dwellers a proverbial pat on the head—the fund amounts to nothing more than that. That is why the anger of rural communities will continue to be visited on the heads of the Administration.
As I said, the Budget will damage the economy. I do not expect the Chief Secretary—or the Financial Secretary, one of the great authorities on tax and excise duties, who is now present on the Treasury Bench—to take that assessment from me. I invite them instead to take it from a distinguished economist, Professor Doug McWilliams, formerly of the Confederation of British Industry and now of the Centre for Economic and Business Research, who predicted that the Government's policies would have damaging consequences. He said that there would be a 5.6 per cent. reduction in non-Government investment in our economy relative to what would have happened if the Conservative Administration had continued; that there would be a £3.8 billion reduction in gross domestic product relative to what would have been achieved under the Conservatives; and that there would be a relative decline in output. He confidently predicted that the Government's misguided and uninformed policies would, by 2002–03, result in 95,000 more people being unemployed than would otherwise have been.
In their Budget, the Government have nothing of which to be proud and much of which to be ashamed. That is why Conservative Members will take pleasure in voting against the Budget tonight. It is bad for the economy, bad for communities and bad for Britain—it deserves to be rejected.

Mr. David Heathcoat—Amory: This debate, which has lasted for four days, has been very revealing. The string and the wrapping paper have come off the Budget, which now looks much less attractive than it did last Tuesday. The Economist said:
The fact is that the Budget was a muddle … it lacked an organising idea.
Today's debate has again failed to supply an organising idea to the Chancellor's intentions. Last Wednesday and Thursday, the Government could not even provide enough speakers from their own ranks to support the Budget, and the debate had to be carried on by a series of speakers from the Opposition.
There was much waffle in the Budget statement. The Chancellor said that it was the people's Budget—it was the people's this and the people's that. He said:
The Chancellor is above all the guardian of the people's money."—[Official Report, 17 March 1998; Vol. 308, c. 1099.]
That is a bit rich coming from someone who has agreed in principle—if, as he hopes, we join the European currency—to hand over control of foreign currency and gold reserves to the European central bank in Frankfurt.
If the Budget had an attempt at an organising aim, it was to get people off welfare and into work. We share that aim. Indeed, the social security reforms pushed through by my right hon. Friend the shadow Chancellor were all designed to make work more attractive, and when we had the money we always reduced the burden of direct taxation on the low-paid.
The difference between us and the present Government is that, in office, we did more to achieve that aim. We not only reformed the welfare state but delivered an economy—the golden economic legacy referred to by my right hon. and hon. Friends throughout the debate—in which unemployment was low and falling. One of the crucial ways in which we did that was by creating a flexible labour market.
The Chancellor claims those achievements as his own, to the extent of lecturing other member states of the European Union on the subject of the need for flexibility in labour markets. He is a cadet member of the Robin Cook school of diplomacy, and his remarks create almost as much resentment as the Foreign Secretary's. Other member states know that, when the Chancellor was in opposition, not only did he do nothing to create the flexible labour market but he opposed all the measures which we enacted over 18 years to achieve it.
European Union member states can see through the Chancellor's rhetoric and know that in practice he is increasing the burden of taxation on businesses, while relying on those businesses to supply new jobs. The Government's welfare-to-work programme will increase the demand for new jobs, but their company taxation will hit the supply.
Behind that contradiction is the lingering belief that the Government create the jobs. That point was well made by my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke): it is not Government but business that creates jobs, and if we tax businesses we will damage employment.
The Red Book, and the information that we have managed to extract since it was published, shows that the burden of taxation on the business sector will approach £25 billion. Admittedly, that includes the windfall tax, about which the Government warned us before taking office, but even if that is taken out we still have more than £20 billion of extra taxation on the productive sector of the economy, on which the Government rely to provide the jobs that people will be asked to seek.
There is a further paradox over savings. Everyone should know that the only realistic alternative to welfare is private savings and long-term pension provision. Last year, the Chancellor attacked pension funds, taking out about £5 billion annually. He has done nothing to correct that in this Budget. Indeed, he has added to the problem by a botched attack on PEPs and TESSAs and, indeed, by the new annual limit on savings, which is nothing like as generous as the one that applied previously.
Under PEPs and TESSAs, a saver could put by £10,800 a year; under the ISAs, which will eventually replace them, the limit will be £5,000. It is not surprising that, again according to the Red Book, the savings ratio is due to fall further. In our last year in office, the savings ratio was 11 per cent. It is due to fall steadily to the end of the century, down to 9 per cent. That is a direct result of the very policies that the Chancellor has already introduced and did nothing to correct in this Budget.
There is another point about savings. Not only is it crazy to hit savings when one is trying to reform the welfare state, but, relatively, it encourages consumption, which has made the burden of the Bank of England that much heavier. It has forced the Bank to increase interest rates to compensate, which has led directly to the high pound, of which we have heard much during this debate. The Chancellor had washed his hands of high interest rates. Well, he has indeed divested himself of decisions about interest rates, but he cannot divest himself of responsibility for monetary policy—that remains with the Chancellor.
When the Bank of England Bill was considered by the House, we warned that there could be a mismatch between taxation and interest rate policy. That has happened and the victim is manufacturing and exporting industry. The confusion in the Monetary Policy Committee has added to the problem. The known splits in the committee are creating an expectation of further interest rate rises.
The Chancellor has compounded that error, or could be about to, by his attitude towards the euro. The drachma has already entered the exchange rate mechanism under the British chairmanship. Now, the Chancellor simply has to reverse his apparent attitude of weakness towards the euro by insisting on a rigid and strict application of the entry criteria. If not, the very weakness of the anticipated euro in the markets will again make the pound relatively stronger and do further damage. The damage done by the strong pound was constantly referred to in the debate, particularly on the Labour Benches. The Chancellor cannot be indifferent to that. The performance of the real economy is every bit as important as the welfare reforms that form the centrepiece of the Budget. The Chancellor cannot simply create rules for himself or divest himself of decisions and then say that the outcome of those decisions has nothing to do with him.
Against that economic background, we can assess the welfare-to-work programme and the working families tax credit in more detail. It is not at all clear that the tax credit as proposed will provide the claimed incentives, and that is the judgment not merely of Conservative Members but of the independent Institute for Fiscal Studies, which is intensely sceptical about what will happen in practice when the credit is introduced.
The Chancellor is indifferent to a lot of things—he said that he was indifferent to the family structure that the working families tax credit would promote. Conservative Members are not indifferent to it. I agreed with the remarks of my hon. Friend the Member for Arundel and South Downs (Mr. Flight). We oppose the switch from the married couple's allowance to the indiscriminate tax credit as proposed in this Budget. We are also worried about the complexity of the scheme, in particular the burden that it will place on business. Such a scheme will work only if it is comprehensible to the participants—not only the people who will get the credit, but those who will administer it in the business and small business sectors.
My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) analysed the details of marginal withdrawal rates with great skill. In particular, he drew attention to the experience in the United States, where the system is subject to much fraud. He is absolutely right. Fraud must be designed out of a welfare system, and we are in danger of creating a system in which fraud is designed in.
We know that the system will be expensive, although the true cost is not fully disclosed. Perhaps an example is the child care credit, which is an important element of the overall scheme. At times, it appears that the Budget is not so much a Budget for children as one for child minders. Some perverse incentives could be set up. For instance, a young mother could take a part-time job as a child minder. She would then become eligible for more than £100 a week in child care credit, so that her own children could be looked after by other child minders, perhaps in the same child care centre at which she worked. We could create a situation where everyone was paid to look after everyone else's children, which is practically the definition of a nanny state. I am sure that that is not the intention of the system, but if the history of the welfare state teaches us anything, it is that good intentions are not enough. They often lead to unintended consequences and unplanned incentives. Almost always, the cost turns out to be much higher than originally predicted.
At the end of this debate, let us finally have an answer to the question constantly posed by Conservative Members about who will get the working families tax credit if a couple disagrees about who should get it. What will happen if the mother believes that she needs it to support the family budget, but the man insists that he needs what I think Martin Taylor called the psychological incentive of having it paid through his wage packet? It is a simple system if they both agree—it can go to the mother or the father—but, if they disagree, as we know they sometimes will, who will get the tax credit? Can we have a simple, straightforward answer to a simple, straightforward question?
On public expenditure, little can be gleaned from the Red Book until more analysis is done. However, I pick up the point made by the hon. Member for Gordon (Mr. Bruce)—although I did not completely follow his figures—that the Government will spend in 1998–99, the next financial year, less in real terms than we had predicted that we would spend. He mentioned a figure of more than £6 billion, but I cannot get the amount up to that. I went to the Library, which confirmed a very significant drop in the real level of public expenditure from what we had planned because of higher inflation under this Government. The Government are not increasing total public expenditure or even maintaining it; they are cutting it. It is not surprising that NHS waiting lists are increasing and that they have broken that promise.
There is nothing in the Budget for pensioners, except, of course, the tax increases. They are the forgotten people of this Budget. All the tax increases are certainly coming their way. The fuel duty increases hit not only cars but heating oil, the duty on which went up by 9 per cent. The duty on tobacco and alcoholic drinks went up. We froze the duty on alcohol in our last two Budgets, and reduced it for spirits.
The hon. Member for Selby (Mr. Grogan) spoke graphically about the problems of smuggling. I know exactly what he is talking about. It is a genuine problem. The hon. Gentleman knows that the Government announced a study into smuggling which has not been published. He may be as keen as we are to get a copy, under the public's right to know, openness, accountability and all that, to find out what his Government are doing

about it. On the face of it, they are only ratcheting up even further the differential between continental duty rates, which are low, and ours, which are already high. That makes the problem worse.
There is also a problem regarding fuel, although that is not smuggled—at least not on such a scale. It is estimated that the motorist faces another £7 billion-worth of duty on road fuels during the lifetime of the Parliament. Diesel is especially badly hit; not only is that mad from an environmental point of view, because diesel produces less carbon dioxide for every mile travelled than petrol, but it is extremely bad news for industry as, yet again, industrial costs are raised. It is the same with stamp duty. The Government pretend that stamp duty is paid by people in large houses, but that is not true: three quarters of the stamp duty increase will be paid by businesses. The Government are gradually eroding the United Kingdom's strength as a low-tax, low-cost European economy.
The subject of capital gains tax was comprehensively and knowledgeably covered by my hon. Friends the Members for South Dorset (Mr. Bruce) and for Bournemouth, West (Mr. Butterfill). They are right to say that the new system will be extremely complex—there are 34 different rates—and it will probably invite many avoidance schemes. The revenue raised from it is supposed to be approximately neutral, which is to say that the changes are not supposed to be of net benefit to the Exchequer. That will happen only if inflation remains low, and we know that inflation is not remaining low, because the Chancellor, in his Red Book, predicts that he will not hit his own inflation target until at least the end of next year. If that failure on inflation persists, the capital gains tax reform will turn into a fraud on savers and investors.
I summarise the Budget as follows: it is a Budget that does nothing to correct the mistakes of last year, but actually compounds them. The mistake of taxing businesses and savings will be bad for employment, bad for inflation, bad for interest rates and bad for welfare reforms. The tax reforms in the Budget do not measure up to the absurdly inflated claims that it was a "once in a generation" Budget. It has been proved in the debate that the reforms are complex, expensive and most unlikely to achieve the desired effects. The Budget concealed as much as it revealed and, above all, it confirmed that the Labour party broke all its pre-election promises on taxation. We shall oppose it.

The Chief Secretary to the Treasury (Mr. Alistair Darling): I shall start by referring to the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), which is more than the shadow Chief Secretary has done. I apologise to the right hon. and learned Gentleman for not being able to be in the Chamber to hear his speech; as I told him earlier, I had to be elsewhere when he caught the Deputy Speaker's eye. I make the same apology to the Liberal Democrat economic spokesman, the hon. Member for Gordon (Mr. Bruce). It is unfortunate that both were called at around the same time. I also pay tribute to all my hon. Friends on the Labour Back Benches who have supported the Government, especially my hon. Friend the Member for Luton, South (Ms Moran), who wanted to speak but, unfortunately, time was against her. It is frustrating to sit listening to the whole Budget debate, only to find that one has been pipped at the post.
The Budget is widely recognised as being radical and reforming. It builds on our determination to deliver economic stability, which is built on a commitment to prudent monetary and fiscal rules. We have made a commitment to low inflation, because we believe that stability is the essential precondition for long-term sustainable growth. It is a Budget to encourage work and to make work pay. It is the biggest modernisation of the tax and benefits system for 20 years. We are extending the new deal and providing child care support—recognising, unlike the previous Government, that the labour market has changed dramatically in the past 20 years. The Budget encourages enterprise: we are continuing our reform of business taxation to boost investment and especially to encourage small developing businesses. We are encouraging savings, promoting research and development and helping universities to develop their research into profitable production.
The Budget builds a fairer society: it supports families, and protects the environment. Rigorous control of public spending has allowed us to invest more in schools, hospitals and transport. We are supporting families by increasing child benefit by the largest amount since its introduction almost 20 years ago. We have helped pensioners: this winter, we not only cut VAT on domestic fuel, whereas the Conservatives would have increased it to 17.5 per cent., but gave pensioners a major package of help. Pensioners received £20 and the poorest received £50, which is something that would not have happened but for the change of Government. This is also a Budget that demonstrates the new Labour Government's belief that fairness and enterprise go hand in hand. It is a Budget that delivers our political and economic objective, which is to raise the long-term sustainable growth rate, to increase employment, to promote a fairer society, and to reduce the inequality which grew during the term of office of the Tory Government.
I want to start with the question of stability. We listened to the right hon. Member for Wokingham (Mr. Redwood) referring to the golden age of Conservative rule. It seems to me that the Tory party continues to delude itself about the past. The right hon. Gentleman talked about a golden age for the countryside. People remember what the Conservatives did to the countryside: the deregulation of buses, the closing of post offices, and BSE which ruined many farmers. People also remember the 22 tax rises designed to pay for economic failure. They remember the high interest rates. So much for a golden age.
Our inheritance was a national debt that had doubled in six years because of Tory economic failure. We will not repeat the mistakes of the late 1980s, when the economic signals were misread, when a surplus became a £50 billion deficit, when inflation hit double figures, when interest rates doubled in two years, and when an "economic miracle" turned into the deepest recession since the war.
Whenever they are asked about public spending, Liberal Democrats tell us to spend more on education, transport, the police, law and order, benefits, councils and just about everything else. Frankly, their position is incredible—although I do understand it. They have decided to become the old tax-and-spend party, only without the taxation bit. There is a stateable case for tax and spend, but tax and spend without the tax is an implausible stance.
There is no question of our building a war chest. We are ensuring that the public finances are maintained in a stable way so that we can provide the public services that we all want. We are still dealing with what we inherited: spending £25 billion a year to service the debt that the Tories left behind. That is more than we are spending on schools.
Last July my right hon. Friend the Chancellor began the process of cutting that debt. In May of last year we found that the Tories had pledged to spend £19 billion more than they were going to get in. That was typical of their approach to the economy. We have cut that gap. We have cut the deficit this year to £5 billion and we will move into balance in two years' time.
So we are providing the stability that brings with it long-term job opportunities. We are providing low inflation. We inherited inflation heading for 4 per cent.— way above the Government's target of 2.5 per cent. That is why we had to take action to bring inflation down. Thanks to our reforms to the Bank of England, we now have the most open and accountable monetary policy framework in the world. More than that, we have the lowest long-term interest rates for 33 years. The last time they were so low was under a Labour Government in the 1960s.
We are providing a stable platform for the future. If we are to achieve an efficient and fair society we need to encourage work, to increase employability and to make work pay. Not just here, but right across the world, the same lessons are being learnt. The modern work force needs to be highly skilled, trained, motivated and adaptable. In a world where people will have many jobs between starting out in the labour market and retirement, it is the Government's job to encourage those who can work to do so, and to foster an environment where people can see the benefits of their work.

Mr. Kenneth Clarke: The right hon. Gentleman appears to have finished with macro-economics already, having dusted down his election speeches yet again. Before he relies too much on mythical figures, such as the £19 billion deficit to which we were supposedly pledged and the 4 per cent. inflation which was supposedly looming, will he deal with current reality? I refer to the underlying inflation rate of 2.6 per cent. which the right hon. Gentleman inherited. I also ask what he proposes to do about the considerable strength of sterling, which has dominated today's debate and which is doing great damage to our manufacturing base. What is he going to do about five successive months of falling industrial production? What does he propose to do to prevent a manufacturing recession and an excessive slowdown of the economy? Or has the right hon. Gentleman not yet noticed these developments?

Mr. Darling: I realise that the right hon. and learned Gentleman does not like to be reminded that he left us with a deficit that cost £25 billion per year to service, and that he left us in a position where inflation was heading to 4 per cent. and above, because he had ignored the advice of the Bank of England to do anything about it in the six months before the general election. He will also bear it in mind that sterling appreciated far more before 1 May 1997 than it has since.
Manufacturing industry will recognise that the Government are taking action to ensure that we look to the long term and achieve long-term economic stability—


that we do not return to the boom and bust that we inherited. In addition, unlike the previous Government, we will not be buffeted around by short-term pressures, reacting to the day's headlines.
This Government are prepared to take the right steps in the country's long-term interests, so people broadly support the stance that my right hon. Friend the Chancellor has taken. His judgment in the Budget was right. There is significant fiscal tightening, amounting to almost 2 per cent. of national income, and most commentators recognise that my right hon. Friend made the right judgment.

Mr. Kenneth Clarke: Will the right hon. Gentleman give way?

Mr. Darling: I shall give way once, but then I shall return to the subject of encouraging work—something that the previous Government did nothing about either.

Mr. Clarke: The Chief Secretary is extremely generous and I am indebted to him for his courtesy, but do I take that long rant to mean that he has no idea what to do about strong sterling and does not think that it has anything to do with him or the Chancellor?

Mr. Darling: To put it succinctly, in language that the right hon. and learned Gentleman will understand, he was wrong and we are right in the position that we are taking.
I return to the subject of encouraging people into work, because the centrepiece of the Budget is reform to the national insurance system to remove barriers to work for the low-paid, and to cut the compliance costs on business. As a result, all employees pay £66 less per year from 1999. Employer and employee national insurance contribution entry fees and the steps in employer national insurance contributions will be abolished.
We are extending the new deal for young people; for the long-term unemployed; and for the partners of the unemployed, who have been excluded from help until now. We are extending the new deal for those communities that have seen the worst, and fared the worst, in the past 18 years. We are extending the new deal to disabled people.
We are introducing the working families tax credit, which will help make work pay, and we are taking other measures to reduce child poverty.

Mr. Ian Bruce: Will the right hon. Gentleman give way?

Mr. Darling: Perhaps in a moment.
I find Conservative Members' attitude difficult to understand. They say that they think that the working families tax credit might be right in principle, and yet they almost seem to wish that it would fail from the start. The right hon. Member for Haltemprice and Howden (Mr. Davis) asked about the working families tax credit. If he looks at the Red Book, he will see that not only are we helping far more people than the family credit system was meant to help, but, whereas most of the people on family credit found marginal deduction rates of 70 per cent., under the scheme that we are proposing only a

quarter of the people have higher marginal deduction rates. In other words, we are reducing the cost that people face when they enter work.

Mr. Bruce: Will the right hon. Gentleman give way?

Mr. Darling: In a moment.
The working families tax credit guarantees every working family an income of at least £180 a week. No family working full-time with earnings less than £220 a week will pay income tax. When people see the benefits that the WFTC will bring, they will see that working families now keep more of their money and that there is more of an incentive to enter work. When they take into account the reforms that we are making in the labour market, the increase in child tax credit and the provision of child care assistance—something that was never done under the previous Government—people will realise that the Government are taking action in ways that the previous Government never did.

Mr. Bruce: rose—

Mr. Darling: I shall give way once to a man with a majority of 77, and hear what he has to say.

Mr. Bruce: If this measure is so good, why do people have to wait until October 1999 for the change? [Interruption.]

Mr. Darling: My hon. Friends are asking why the country had to wait 18 years for this sort of reform.
We are determined to tackle child poverty. We inherited a situation where one child in three is brought up in poverty—what an indictment of one of the most industrialised countries in the world. We have introduced significant reforms, including the increase in child benefit by £2.50 from next year, that will ensure that we have a fair and efficient society.
We have also introduced a Budget for enterprise. Reform to make work pay must be accompanied by an environment that encourages jobs. It must be very galling for the Conservatives to find that, despite their criticisms, nobody outside the Conservative party agrees with them. Our reforms to company taxation have been widely welcomed inside and outside the House.

Mr. Peter Lilley: rose—

Mr. Darling: I shall give way in a moment. We have reformed corporation tax by cutting the rate to the lowest level ever, and we have said that it will not increase. We have cut the rates of tax being paid by small business, and we shall see major growth in employment in the small business sector in the future. We have examined ways of improving research and development and we have reformed the capital gains tax system.
I am about to give way for the last time to the shadow Chancellor. One of the things that business likes most about the Labour party is its positive and constructive attitude to Europe—something that the shadow Chancellor and his right hon. and hon. Friends will never have.

Mr. Lilley: I am grateful to the Chief Secretary for giving way. He said that nobody agrees with our critique


of the Budget. Is he not aware that the TUC has forecast that, as a direct result of the Chancellor's tightening of fiscal policy and his monetary and exchange rate policies, unemployment will rise by 100,000 during the rest of the year?

Mr. Darling: At last year's Tory party conference, the Tories tried to tell us that much of the past 18 years had been a ghastly mistake. They claimed that they were a caring party and that they were sorry for everything they had done. The right hon. Gentleman now says that the TUC is the friend of the Tory party, but that claim has no credibility whatsoever.
I emphasise the fact that, because we have exercised prudent control on public spending this year, we have been able to carry forward £l½ billion to next year. As we are prudent, we have allocated half a billion pounds to the reserve. However, we have also made more money available for schools, the health service and transport in the coming year. We are showing how, by conducting a root-and-branch examination of all public spending and by rooting out waste and inefficiency, the Government have been able to redirect money to our priorities in this Parliament and beyond. We shall see a great deal more of that during this Parliament.
Prudent management of public spending has allowed us to allocate more money to our priorities. An extra £250 million for schools brings the total new money invested in schools since the election to £2½ billion—that is more money than the Liberal Democrats ever promised. We have been able to increase the amount of money going to the health service by an additional £2 billion. That money would not have been available but for the new Labour Government. We have been able to put money into public transport, and we are beginning to make up the backlog of investment needed in the London underground system, which was so neglected by the previous Government.
Last July, the Chancellor took the first steps towards modernising the British economy, ensuring that we have economic stability and reducing the huge levels of debt that we inherited from the previous Government. We have reformed the Bank of England. We have yet to hear the Conservatives' position on the Bank of England, but most people recognise that that was a useful and a good reform. We are modernising the welfare state, and this Budget is a further step change along the way. We have extended the new deal, financed by the windfall levy on the privatised utilities. We are reforming the tax and benefit system and we are ensuring that work pays. We are making sure that help goes where it is needed. We are redirecting assistance to families with children, giving children the start in life that we promised them and that we know they need.
Of course, modernising the welfare state goes hand in hand with encouraging enterprise. Enterprise and fairness go together. We are helping business; we are encouraging investment; we are reducing business tax and red tape. We are redirecting public funds to where they are needed, in schools, hospitals and transport. We are making sure that spending follows this Government's priorities in this Parliament and beyond.
This is a radical and reforming Budget. We are committed to a fairer society. We are committed to reversing the inequalities over which the Tories presided.
We want a more productive, high-employment economy. This is a new Labour Budget and, step by step, we are delivering our manifesto promises. This is a Budget for enterprise and fairness, a Budget that has set new ambitions for Britain. I commend it to the House.

Question put and agreed to.

Resolved,
That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance; but this Resolution does not extend to the making of any amendment with respect to value added tax so as to provide—

(a) for zero-rating or exempting a supply, acquisition or importation;
(b) for refunding an amount of tax;
(c) for varying any rate at which that tax is at any time chargeable; or
(d) for any relief, other than a relief which—

(i) so far as it is applicable to goods, applies to goods of every description, and
 so far as it is applicable to services, applies to services of every description.

MADAM SPEAKER then, pursuant to paragraph (3) of Standing Order No. 51 (Ways and Means motions), put forthwith the Questions necessary to dispose of the further motions.

Orders of the Day — 2. BEER (RATE OF DUTY)

Motion made, and Question put,

That provision may be made increasing the rate of duty set out in section 36(1) of the Alcoholic Liquor Duties Act 1979.

The House divided: Ayes 350, Noes 147.

Division No. 216]
[10 pm


AYES


Abbott, Ms Diane
Blunkett, Rt Hon David


Ainger, Nick
Borrow, David


Ainsworth, Robert (Cov'try NE)
Bradley, Peter (The Wrekin)


Allan, Richard
Brake, Tom


Allen, Graham
Brand, Dr Peter


Anderson, Donald (Swansea E)
Breed, Colin


Anderson, Janet (Rossendale)
Brinton, Mrs Helen


Armstrong, Ms Hilary
Brown, Rt Hon Gordon (Dunfermline E)


Ashdown, Rt Hon Paddy



Ashton, Joe
Brown, Rt Hon Nick (Newcastle E)


Atherton, Ms Candy
Brown, Russell (Dumfries)


Baker, Norman
Browne, Desmond


Ballard, Mrs Jackie
Bruce, Malcolm (Gordon)


Barnes, Harry
Buck, Ms Karen


Barron, Kevin
Burden, Richard


Battle, John
Burgon, Colin


Bayley, Hugh
Burnett, John


Beckett, Rt Hon Mrs Margaret
Burstow, Paul


Berth, Rt Hon A J
Byers, Stephen


Bell, Martin (Tatton)
Cable, Dr Vincent


Bell, Stuart (Middlesbrough)
Caborn, Richard


Benn, Rt Hon Tony
Campbell, Alan (Tynemouth)


Bennett, Andrew F
Campbell, Menzies (NE Fife)


Benton, Joe
Campbell—Savours, Dale


Bermingham, Gerald
Canavan, Dennis


Berry, Roger
Cann, Jamie


Best, Harold
Caplin, Ivor


Blair, Rt Hon Tony
Caton, Martin


Blears, Ms Hazel
Chaytor, David


Blizzard, Bob
Chidgey, David






Chisholm, Malcolm
Grant, Bernie


Church, Ms Judith
Griffiths, Jane (Reading E)


Clapham, Michael
Grocott, Bruce


Clark, Rt Hon Dr David (S Shields)
Grogan, John


Clark, Dr Lynda (Edinburgh Pentlands)
Gunnell, John



Hain, Peter


Clarke, Rt Hon Tom (Coatbridge)
Hall, Mike (Weaver Vale)


Clelland, David
Hall, Patrick (Bedford)


Clwyd, Ann
Hancock, Mike


Coaker, Vernon
Hanson, David


Coffey, Ms Ann
Harman, Rt Hon Ms Harriet


Cohen, Harry
Harris, Dr Evan


Coleman, lain
Heal, Mrs Sylvia


Colman, Tony
Healey, John


Connarty, Michael
Heath, David (Somerton & Frome)


Cook, Frank (Stockton N)
Henderson, Doug (Newcastle N)


Cooper, Yvette
Henderson, Ivan (Harwich)


Corbett, Robin
Hepburn, Stephen


Corbyn, Jeremy
Heppell, John


Corston, Ms Jean
Hewitt, Ms Patricia


Cousins, Jim
Hill, Keith


Cox, Tom
Hinchliffe, David


Cryer, John (Hornchurch)
Hodge, Ms Margaret


Cummings, John
Hoey, Kate


Cunliffe, Lawrence
Home Robertson, John


Cunningham, Jim (Cov'try S)
Hoon, Geoffrey


Cunningham, Ms Roseanna
Hope, Phil


(Perth)
Hopkins, Kelvin


Dafis, Cynog
Howarth, Alan (Newport E)


Dalyell, Tarn
Howarth, George (Knowsley N)


Darling, Rt Hon Alistair
Howells, Dr Kim


Darvill, Keith
Hoyle, Lindsay


Davey, Edward (Kingston)
Hughes, Kevin (Doncaster N)


Davey, Valerie (Bristol W)
Hughes, Simon (Southwark N)


Davidson, Ian
Humble, Mrs Joan


Davies, Rt Hon Denzil (Llanelli)
Hurst, Alan


Davies, Rt Hon Ron (Caerphilly)
Hutton, John


Dawson, Hilton
Iddon, Dr Brian


Dean, Mrs Janet
Jackson, Helen (Hillsborough)


Denham, John
Jamieson, David


Dismore, Andrew
Johnson, Alan (Hull W & Hessle)


Dobson, Rt Hon Frank
Johnson, Miss Melanie


Donohoe, Brian H
(Welwyn Hatfield)


Doran, Frank
Jones, Barry (Alyn & Deeside)


Dowd, Jim
Jones, Helen (Warrington N)


Drew, David
Jones, Ms Jenny


Drew, David
(Wolverh'ton SW)


Dunwoody, Mrs Gwyneth
Jones, Martyn (Clwyd S)


Eagle, Maria (L 'pool Garston)
Kaufman, Rt Hon Gerald


Edwards, Huw
Keeble, Ms Sally


Ellman, Mrs Louise
Keetch, Paul


Ennis, Jeff
Kemp, Fraser


Ewing, Mrs Margaret
Kennedy, Charles (Ross Skye)


Fearn, Ronnie
Kennedy, Jane (Wavertree)


Field, Rt Hon Frank
Kidney, David


Fisher, Mark
King, Andy (Rugby & Kenilworth)


Fitzpatrick, Jim
King, Ms Oona (Bethnal Green)


Fitzsimons, Loma
Kirkwood, Archy


Flint, Caroline
Kumar, Dr Ashok


Flynn, Paul
Ladyman, Dr Stephen


Foster, Rt Hon Derek
Lawrence, Ms Jackie


Foster, Don (Bath)
Laxton, Bob


Foster, Michael J (Worcester)
Lepper, David


Foulkes, George
Levitt, Tom


Fyfe, Maria
Lewis, Ivan (Bury S)


Galbraith, Sam
Lewis, Terry (Worsley)


Galloway, George
Livsey, Richard


Gapes, Mike
Llwyd, Elfyn


George,Andrew (St lves)
Lock, David


George, Bruce (Walsall S)
Love, Andrew


Gibson, Dr Ian
McAvoy, Thomas


Gilroy, Mrs Linda
McCabe, Steve


Godman, Norman A
McCartney, Ian (Makerfield)


Golding, Mrs Llin
McDonagh, Siobhain


Gorrie, Donald
Macdonald, Calum


Graham, Thomas
McDonnell, John





McFall, John
Sedgemore, Brian


McGuire, Mrs Anne
Shaw, Jonathan


Mclsaac, Shona
Sheerman, Barry


McKenna, Mrs Rosemary
Sheldon, Rt Hon Robert


McLeish, Henry
Simpson, Alan (Nottingham S)


Maclennan, Rt Hon Robert
Skinner, Dennis


McNulty, Tony
Smith, Rt Hon Andrew (Oxford E)


MacShane, Denis
Smith, Angela (Basildon)


Mactaggart, Fiona
Smith, Rt Hon Chris (Islington S)


McWilliam, John
Smith, Miss Geraldine


Mahon, Mrs Alice
(Morecambe & Lunesdale)


Mandelson, Peter
Smith, Jacqui (Redditch)


Marek, Dr John
Smith, John (Glamorgan)


Marsden, Paul (Shrewsbury)
Smith, Llew (Blaenau Gwent)


Marshall—Andrews, Robert
Smith, Sir Robert (WAb'd'ns)


Martlew, Eric
Soley, Clive


Maxton, John
Spellar, John


Meale, Alan
Squire, Ms Rachel


Michael, Alun
Starkey, Dr Phyllis


Michie, Bill (Shefld Heeley)
Steinberg, Gerry


Milburn, Alan
Stevenson, George


Miller, Andrew
Stinchcombe, Paul


Mitchell, Austin
Stoate, Dr Howard


Moffatt, Laura
Strang, Rt Hon Dr Gavin


Moonie, Dr Lewis
Straw, Rt Hon Jack


Moran, Ms Margaret
Strinqer, Graham


Morgan, Alasdair (Galloway)
Stunell, Andrew


Morgan, Ms Julie (Cardiff N)
Sutcliffe, Gerry


Morgan, Rhodri (Cardiff W)
Swinney, John


Morris, Ms Estelle (B'ham Yardley)



Morris, Rt Hon John (Aberavon)
Taylor, Rt Hon Mrs Ann (Dewsbury)


Mudie, George
Taylor, Ms Dari (Stockton S)


Mullin, Chris



Murphy, Denis (Wansbeck)
Taylor, David (NWLeics)


Naysmith, Dr Doug
Taylor, Matthew (Truro)


Oaten, Mark
Temple—Morris, Peter


O'Hara, Eddie
Thomas, Gareth (Clwyd W)


Olner, Bill
Thomas, Gareth R (Harrow W)


O'Neill, Martin
Timms, Stephen


Öpik, Lembit
Tipping, Paddy


Palmer, Dr Nick
Todd, Mark


Pendry, Tom
Tonge, Dr Jenny


Perham, Ms Linda
Touhig, Don


Pickthall, Colin
Trickett, Jon


Pike, Peter L
Truswell, Paul


Plaskitt, James
Turner, Dennis (Wolverh'ton SE)


Pope, Greg
Turner, Dr Desmond (Kemptown)


Powell, Sir Raymond
Twigg, Derek (Hatton)


Prentice, Ms Bridget (Lewisham E)
Twigg, Stephen (Enfield)


Prescott, Rt Hon John
Tyler, Paul


Primarolo, Dawn
Wallace, James


Prosser, Gwyn
Walley, Ms Joan


Purchase, Ken
Wareing, Robert N


Quin, Ms Joyce
Watts, David


Quinn, Lawrie
Webb, Steve


Radice, Giles
White, Brian


Rapson, Syd
Whitehead, Dr Alan


Raynsford, Nick
Wicks, Malcolm


Reed, Andrew (Loughborough)
Williams, Rt Hon Alan


Reid, Dr John (Hamilton N)
(Swansea W)


Rendel, David
Williams, Mrs Betty (Conwy)


Robertson, Rt Hon George
Willis, Phil


(Hamilton S)
Wills, Michael


Robinson, Geoffrey (Cov'try NW)
Wilson, Brian


Rogers, Allan
Winnick, David


Rooney, Terry
Winterton, Ms Rosie (Doncaster C)


Ross, Ernie (Dundee W)
Wise, Audrey


Rowlands, Ted
Woolas, Phil


Roy, Frank
Wray, James


Ruddock, Ms Joan
Wright, Anthony D (Gt Yarmouth)


Russell, Bob (Colchester)
Wright, Dr Tony (Cannock)


Russell, Ms Christine (Chester)
Wyatt, Derek


Ryan, Ms Joan



Salmond, Alex
Tellers for the Ayes:


Sanders, Adrian
Mr. Jon Owen Jones and


Savidge, Malcolm
Mr. Clive Betts.






NOES


Ainsworth, Peter (E Surrey)
Jenkin, Bernard


Amess, David
Johnson Smith,


Ancram, Rt Hon Michael
Rt Hon Sir Geoffrey


Arbuthnot, James
Key, Robert


Atkinson, Peter (Hexham)
King, Rt Hon Tom (Bridgwater)


Baldry, Tony
Kirkbride, Miss Julie


Bercow, John
Laing, Mrs Eleanor


Beresford, Sir Paul
Lansley, Andrew



Leigh, Edward


Blunt, Crispin
Letwin, Oliver


Body, Sir Richard
Lewis, Dr Julian (New Forest E)


Boswell, Tim
Lidington, David


Bottomley, Peter (Worthing W)
Lilley, Rt Hon Peter


Bottomley, Rt Hon Mrs Virginia
Lloyd, Rt Hon Sir Peter (Fareham)


Brady, Graham
Loughton, Tim


Brazier, Julian
Luff, Peter


Brooke, Rt Hon Peter
Lyell, Rt Hon Sir Nicholas


Browning, Mrs Angela
MacGregor, Rt Hon John


Bruce, Ian (S Dorset)
McIntosh, Miss Anne


Burns, Simon
MacKay, Andrew


Butterfill, John
Maclean, Rt Hon David


Cash, William
McLoughlin, Patrick


Chapman, Sir Sydney (Chipping Barnet)
Madel, Sir David



Major, Rt Hon John



Malins, Humfrey


Chope, Christopher
Mates, Michael


Clappison, James
Maude, Rt Hon Francis


Clark, Rt Hon Alan (Kensington)
Mawhinney, Rt Hon Sir Brian


Clark, Dr Michael (Rayleigh)
May, Mrs Theresa


Clarke, Rt Hon Kenneth (Rushcliffe)
Moss, Malcolm



Nicholls, Patrick


Clifton—Brown, Geoffrey
Norman, Archie


Collins, Tim
Ottaway, Richard


Colvin, Michael
Page, Richard


Cormack, Sir Patrick
Paice, James


Cran, James Curry, Rt Hon David
Paterson, Owen



Pickles, Eric Prior, David


Davis, Rt Hon David (Haltemprice)
Randall, John


Day, Stephen
Redwood, Rt Hon John


Dorrell, Rt Hon Stephen
Robathan, Andrew


Duncan, Alan
Robertson, Laurence (Tewk'b'ry)


Duncan Smith, lain
Roe, Mrs Marion (Broxbourne)


Emery, Rt Hon Sir Peter
Rowe, Andrew (Faversham)


Evans, Nigel
Ruffley, David


Faber, David
St Aubyn, Nick


Fabricant, Michael
Sayeed, Jonathan


Fallon, Michael
Shephard, Rt Hon Mrs Gillian


Flight, Howard
Simpson, Keith (Mid-Norfolk)


Forth, Rt Hon Eric
Soames, Nicholas


Fowler, Rt Hon Sir Norman 
Spelman, Mrs Caroline

Fraser, Christopher
Spicer, Sir Michael



Spring, Richard


Gibb, Nick
Stanley, Rt Hon Sir John


Gill, Christopher
Steen, Anthony


Gillan, Mrs Cheryl
Streeter, Gary


Goodlad, Rt Hon Sir Alastair
Swayne, Desmond


Gray, James
Syms, Robert


Green, Damian
Tapsell, Sir Peter


Greenway, John
Taylor, Ian (Esher & Walton)


Grieve, Dominic
Taylor, Rt Hon John D (Strangford)


Gummer, Rt Hon John
Taylor, John M (Solihull)


Hamilton, Rt Hon Sir Archie
Taylor, Sir Teddy


Hammond, Philip
Townend, John


Hayes, John
Tredinnick, David


Heath, Rt Hon Sir Edward
Trend, Michael



Tyrie, Andrew


Heathcoat—Amory, Rt Hon David
Viggers, Peter


Heseltine, Rt Hon Michael
Walter, Robert


Hogg, Rt Hon Douglas
Wardle, Charles


Horam, John
Waterson, Nigel


Howard, Rt Hon Michael
Wells, Bowen


Hunter, Andrew
Whitney, Sir Raymond


Jack, Rt Hon Michael
Widdecombe, Rt Hon Miss Ann


Jackson, Robert (Wantage)
Wilkinson, John





Willetts, David
Young, Rt Hon Sir George


Winterton, Mrs Ann (Congleton)
Tellers for the Noes:


Winterton, Nicholas (Macclesfield)
Mr. John Whittingdale and


Yeo, Tim
Mr. Oliver Heald.

Question accordingly agreed to.

Orders of the Day — 3. SPARKLING WINE, MADE-WINE AND CIDER (RATES OF DUTY)

Resolved,

That the Alcoholic Liquor Duties Act 1979 shall be amended as follows—

(1)In Part I of the Table of rates of duty in Schedule 1, in column 2 of the fourth entry, for "201.50" there shall be substituted "161.20".

(2)In section 62(1 A)(a), for "£37.54" there shall be substituted "£45.05".

(3)This Resolution shall have effect as from 6 o'clock in the evening of 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 4. WINE AND MADE-WINE (RATES OF DUTY)

Resolved,

That provision may be made increasing the rates of duty set out in the Table in Schedule 1 to the Alcoholic Liquor Duties Act 1979.

Orders of the Day — 5. CIDER (RATES OF DUTY)

Resolved,

That provision may be made increasing the rates of duty set out in section 62(1A) of the Alcoholic Liquor Duties Act 1979.

Orders of the Day — 6. BEER (DRAWBACK)

Resolved,

That provision may be made repealing section 42 of the Alcoholic Liquor Duties Act 1979

Orders of the Day — 7. HYDROCARBON OIL (PRODUCTION IN THE UNITED KINGDOM)

Resolved,

That provision may be made charging excise duty on hydrocarbon oil produced in the United Kingdom.

Orders of the Day — 8. HYDROCARBON OIL (RATES OF DUTIES AND REBATES)

Motion made, and Question put,

That—

(1)In section 6(1A) of the Hydrocarbon Oil Duties Act 1979—

(a)in paragraph (a), for "0.4510" there shall be substituted "0.4926";
(b)in paragraph (b), for "0.3928" there shall be substituted "0.4299"; and
(c)in paragraph (c), for "0.4028" there shall be substituted "0.4499".

(2)In section 11(1) of that Act—

(a)in paragraph (a), for "£0.0200" there shall be substituted "£0.0218"; and
(b)in each of paragraphs (b) and (ba), for "£0.0258" there shall be substituted "£0.0282".

(3)In section 13A(1A) of that Act—

(a)in paragraph (a), for "0.0150" there shall be substituted "£0.0050"; and
(b)in paragraph (b), for "£0.0482" there shall be substituted "£0.0527".

(4)In section 14(1) of that Act, for "£0.0200" there shall be substituted "£0.0218".

(5) This Resolution shall have effect as from 6 o'clock in the evening of 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

The House divided: Ayes 302, Noes 197.

Division No. 217]
[10.15 pm


AYES


Abbott, Ms Diane
Corston, Ms Jean


Ainger, Nick
Cousins, Jim


Ainsworth, Robert (Cov'try NE)
Cox, Tom


Allen, Graham
Cryer, John (Hornchurch)


Anderson, Donald (Swansea E)
Cummings, John


Anderson, Janet (Rossendale)
Cunliffe, Lawrence


Armstrong, Ms Hilary
Cunningham, Jim (Cov'try S)


Ashton, Joe
Dalyell, Tarn


Atherton, Ms Candy
Darling, Rt Hon Alistair


Barnes, Harry
Darvill, Keith


Barron, Kevin
Davey, Valerie (Bristol W)


Battle, John
Davidson, Ian


Bayley, Hugh
Davies, Rt Hon Denzil (Llanelli)


Beckett, Rt Hon Mrs Margaret
Davies, Rt Hon Ron (Caerphilly)


Bell, Martin (Tatton)
Dawson, Hilton


Bell, Stuart (Middlesbrough)
Dean, Mrs Janet


Benn, Rt Hon Tony
Denham, John


Bennett, Andrew F
Dismore, Andrew


Benton, Joe
Dobson, Rt Hon Frank


Bermingham, Gerald
Donohoe, Brian H


Berry, Roger
Doran, Frank


Best, Harold
Dowd, Jim


Blair, Rt Hon Tony
Drew, David


Blears, Ms Hazel
Drown, Ms Julia


Blizzard, Bob
Dunwoody, Mrs Gwyneth


Blunkett, Rt Hon David
Eagle, Maria (L'pool Garston)


Borrow, David
Edwards, Huw


Bradley, Peter (The Wrekin)
Ellman, Mrs Louise


Brinton, Mrs Helen
Ennis, Jeff


Brown, Rt Hon Gordon
Field, Rt Hon Frank


(Dunfermline E)
Fisher, Mark


Brown, Rt Hon Nick (Newcastle E)
Fitzpatrick, Jim


Brown, Russell (Dumfries)
Fitzsimons, Lorna


Browne, Desmond
Flint, Caroline


Buck, Ms Karen
Flynn, Paul


Burden, Richard
Foster, Rt Hon Derek


Burgon, Colin
Foster, Michael J (Worcester)


Byers, Stephen
Foulkes, George


Cabom, Richard
Fyfe, Maria


Campbell, Alan (Tynemouth)
Galbraith, Sam


Campbell—Savours, Dale
Galloway, George


Canavan, Dennis
Gapes, Mike


Cann, Jamie
George, Bruce (Walsall S)


Caplin, Ivor
Gibson, Dr Ian


Caton, Martin
Gilroy, Mrs Linda


Chaytor, David
Godman, Norman A


Chisholm, Malcolm
Golding, Mrs Llin


Church, Ms Judith
Graham, Thomas


Clapham, Michael
Grant, Bernie


Clark, Rt Hon Dr David (S Shields)
Griffiths, Jane (Reading E)


Clark, Dr Lynda
Grocott, Bruce


(Edinburgh Pentlands)
Grogan, John


Clarke, Rt Hon Tom (Coatbridge)
Gunnell, John


Clelland, David
Hain, Peter


Clwyd, Ann
Hall, Mike (Weaver Vale)


Coaker, Vernon
Hall, Patrick (Bedford)


Coffey, Ms Ann
Hanson, David


Cohen, Harry
Harman, Rt Hon Ms Harriet


Coleman, lain
Heal, Mrs Sylvia


Colman, Tony
Healey, John


Connarty, Michael
Henderson, Doug (Newcastle N)


Cook, Frank (Stockton N)
Henderson, Ivan (Harwich)


Cooper, Yvette
Hepburn, Stephen


Corbett, Robin
Heppell, John


Corbyn, Jeremy
Hewitt, Ms Patricia





Hill, Keith
Morris, Ms Estelle (B'ham Yardley)


Hinchliffe, David
Morris, Rt Hon John (Aberavon)


Hodge, Ms Margaret
Mudie, George


Hoey, Kate
Mullin, Chris


Home Robertson, John
Murphy, Denis (Wansbeck)


Hope, Phil
Naysmith, Dr Doug


Hopkins, Kelvin
O'Hara, Eddie


Howarth, Alan (Newport E)
Olner, Bill


Howarth, George (KnowsleyN)
O'Neill, Martin


Howells, Dr Kim
Palmer, Dr Nick


Hoyle, Lindsay
Pendry, Tom


Hughes, Kevin (Doncaster N)
Perham, Ms Linda


Humble, Mrs Joan
Pickthall, Colin


Hurst, Alan
Pike, Peter L


Hutton, John
Plaskitt, James


Iddon, Dr Brian
Pope, Greg


Jackson, Helen (Hillsborough)
Powell, Sir Raymond


Jamieson, David
Prentice, Ms Bridget (Lewisham E)


Johnson, Alan (Hull W & Hessle)
Prescott, Rt Hon John


Johnson, Miss Melanie
Primarolo, Dawn


(Welwyn Hatfield)
Prosser, Gwyn


Jones, Barry (Alyn & Deeside)
Purchase, Ken


Jones, Helen (Warrington N)
Quin, Ms Joyce


Jones, Ms Jenny
Quinn, Lawrie


(Wolverh'ton SW)
Radice, Giles


Jones, Martyn (Clwyd S)
Rapson, Syd


Kaufman, Rt Hon Gerald
Raynsford, Nick


Keeble, Ms Sally
Reed, Andrew (Loughborough)


Kemp, Fraser
Reid, Dr John (Hamilton N)


Kennedy, Jane (Wavertree)



Kidney, David
Robertson, Rt Hon George(Hamilton S)


King, Andy (Rugby & Kenilworth)



King, Ms Oona (Bethnal Green)
Robinson, Geoffrey (Cov'try NW)


Kumar, Dr Ashok
Rogers, Allan


Ladyman, Dr Stephen
Rooney, Terry


 Lawrence, Ms Jackie
Ross, Ernie (Dundee W)


Laxton, Bob
Rowlands, Ted


Lepper, David
Roy, Frank


Levitt, Tom
Ruddock, Ms Joan


Lewis, Ivan (Bury S)
Russell, Ms Christine (Chester)


Lewis, Terry (Worsley)
Ryan, Ms Joan


Lock, David
Savidge, Malcolm


Love, Andrew
Sedgemore, Brian


McAvoy, Thomas
Shaw, Jonathan


McCabe, Steve
Sheerman, Barry


McCartney, Ian (MakerHeld)
Sheldon, Rt Hon Robert


McDonagh, Siobhain
Simpson, Alan (Nottingham S)


Macdonald, Calum
Skinner, Dennis


McDonnell, John
Smith, Rt Hon Andrew (Oxford E)


McFall, John
Smith, Angela (Basildon)


McGuire, Mrs Anne
Smith, Rt Hon Chris (Islington S)


Mclsaac, Shona
Smith, Miss Geraldine


McKenna, Mrs Rosemary
(Morecambe & Lunesdale)


McLeish, Henry
Smith, Jacqui (Redditch)


McNulty, Tony
Smith, John (Glamorgan)


MacShane, Denis
Smith, Llew (Blaenau Gwent)


Mactaggart, Fiona
Soley, Clive


McWilliam, John
Spellar, John


Mahon, Mrs Alice
Squire, Ms Rachel


Mandelson, Peter
Starkey, Dr Phyllis


Marek, Dr John
Steinberg, Gerry


Marsden, Paul (Shrewsbury)
Stevenson, George


Marshall—Andrews, Robert
Stinchcombe, Paul


Martlew, Eric
Stoate, Dr Howard


Maxton, John
Strang, Rt Hon Dr Gavin


Meale, Alan
Straw, Rt Hon Jack


Michael, Alun
Stringer, Graham


Michie, Bill (Shefld Heeley)
Sutcliffe, Gerry


Milburn, Alan
Taylor, Rt Hon Mrs Ann


Miller, Andrew
(Dewsbury)


Mitchell, Austin
Taylor, Ms Dari (Stockton S)


Moffatt, Laura
Taylor, David (NWLeics)


Moonie, Dr Lewis
Temple-Morris, Peter


Moran, Ms Margaret
Thomas, Gareth (Clwyd W)


Morgan, Ms Julie (Cardiff N)
Thomas, Gareth R (Harrow W)


Morgan, Rhodri (Cardiff W)
Timms, Stephen






Tipping, Paddy
Williams, Rt Hon Alan (Swansea W)


Todd, Mark



Touhig, Don
Wlliams, Mrs Betty (Conwy)


Trickett, Jon
Wills, Michael


Truswell, Paul
Wilson, Brian


Turner, Dennis (Wolverh'ton SE)
Winnick, David


Turner Dr Desmond (Kemptown)
Winterton, Ms Rosie (Doncaster C)


Twigg, Derek (Halton)
Wise, Audrey


Twigg, Stephen (Enfield)
Woolas, Phil


Vaz, Keith
Wray, James


Walley, Ms Joan
Wright, Anthony D (Gt Yarmouth)


Wareing, Robert N
Wright, Dr Tony (Cannock)


Watts, David
Wyatt, Derek


White, Brian
Tellers for the Ayes:


Whitehead, Dr Alan
Mr. Jon Owen Jones and


Wicks, Malcolm
Mr. Clive Betts.


NOES


Ainsworth, Peter (E Surrey)
Duncan Smith, lain


Allan, Richard
Emery, Rt Hon Sir Peter


Amess, David
Evans, Nigel


Ancram, Rt Hon Michael
Ewing, Mrs Margaret


Arbuthnot, James
Faber, David


Ashdown, Rt Hon Paddy
Fabricant, Michael


Atkinson, Peter (Hexham)
Fallon, Michael


Baker, Norman
Feam, Ronnie


Baldry, Tony
Flight, Howard


Ballard, Mrs Jackie
Forth, Rt Hon Eric


Berth, Rt Hon A J
Foster, Don (Bath)


Bercow, John
Fowler, Rt Hon Sir Norman


Beresford, Sir Paul
Fraser, Christopher


Blunt, Crispin
George, Andrew (St Ives)


Body, Sir Richard
Gibb, Nick


Boswell, Tim
Gill, Christopher


Bottomley, Peter (Worthing W)
Gillan, Mrs Cheryl


Bottomley, Rt Hon Mrs Virginia
Goodlad, Rt Hon Sir Alastair


Brady, Graham
Gome, Donald


Brake, Tom
Gray, James


Brand, Dr Peter
Green, Damian


Brazier, Julian
Greenway, John


Breed, Colin
Grieve, Dominic


Brooke, Rt Hon Peter
Gummer, Rt Hon John


Browning, Mrs Angela
Hamilton, Rt Hon Sir Archie


Bruce, Ian (S Dorset)
Hammond, Philip


Bruce, Malcolm (Gordon)
Hancock, Mike


Burnett, John
Harris, Dr Evan


Burns, Simon
Hayes, John


Burstow, Paul
Heath, David (Somerton & Frome)


Butterfill, John
Heath, Rt Hon Sir Edward


Cable, Dr Vincent
Heathcoat—Amory, Rt Hon David


Campbell, Menzies (NE Fife)
Heseltine, Rt Hon Michael


Cash, William
Hogg, Rt Hon Douglas


Chapman, Sir Sydney (Chipping Barnet)
Horam, John



Howard, Rt Hon Michael


Chidgey, David
Hughes, Simon (Southwark N)


Chope, Christopher
Hunter, Andrew


Clappison, James
Jack, Rt Hon Michael


Clark, Rt Hon Alan (Kensington)
Jackson, Robert (Wantage)


Clark, Dr Michael (Rayleigh)
Jenkin, Bernard


Clarke, Rt Hon Kenneth
Johnson Smith,


(Rushdiffe)
Rt Hon Sir Geoffrey


Clifton-Brown, Geoffrey
Jones, Nigel (Cheltenham)


Collins, Tim
Keetch, Paul


Colvin, Michael
Kennedy, Charles (Ross Skye)


Cormack, Sir Patrick
Key, Robert


Cran, James
King, Rt Hon Tom (Bridgwater)


Cunningham, Ms Roseanna
Kirkbride, Miss Julie


(Perth)
Kirkwood, Archy


Curry, Rt Hon David
Laing, Mrs Eleanor


Dafis, Cynog
Lansley, Andrew


Davey, Edward (Kingston)
Leigh, Edward


Davis, Rt Hon David (Hattemprice)
Letwin, Oliver


Day, Stephen
Lewis, Dr Julian (New Forest E)


Dorrell, Rt Hon Stephen
Lidington, David


Duncan, Alan
Lilley, Rt Hon Peter





Livsey, Richard
Simpson, Keith (Mid-Norfolk)


Lloyd, Rt Hon Sir Peter (Fareham)
Smith, Sir Robert (WAb'd'ns)


Llwyd, Elfyn
Smyth, Rev Martin (Belfast S)


Loughton, Tim
Soames, Nicholas


Luff, Peter
Spelman, Mrs Caroline


Lyell, Rt Hon Sir Nicholas
Spicer, Sir Michael


MacGregor, Rt Hon John
Spring, Richard


McIntosh, Miss Anne
Stanley, Rt Hon Sir John


MacKay, Andrew
Steen, Anthony


Maclean, Rt Hon David
Streeter, Gary


McLoughlin, Patrick
Stunell, Andrew


Madel, Sir David
Swayne, Desmond


Major, Rt Hon John
Swinney, John


Malins, Humfrey
Syms, Robert


Mates, Michael
Tapsell, Sir Peter


Maude, Rt Hon Francis
Taylor, Ian (EsherA Walton)


Mawhinney, Rt Hon Sir Brian
Taylor, Rt Hon John D (Strangford)


May, Mrs Theresa
Taylor, John M (Solihull)


Morgan, Alasdair (Galloway)
Taylor, Matthew (Truro)


Moss, Malcolm
Taylor, Sir Teddy


Nicholls, Patrick
Tonge, Dr Jenny


Norman, Archie
Townend, John


Oaten, Mark
Tredinnick, David Trend, Michael


Öpik, Lembit
Tyler, Paul


Ottaway, Richard
Tyrie, Andrew


Page, Richard
Viggers, Peter


Paice, James
Wallace, James


Paterson, Owen
Walter, Robert


Pickles, Eric
Wardle, Charles


Prior, David
Waterson, Nigel


Randall, John
Webb, Steve


Redwood, Rt Hon John
Wells, Bowen


Rendel, David
Whitney, Sir Raymond


Robathan, Andrew
Widdecombe, Rt Hon Miss Ann


Robertson, Laurence (Tewk'b'ry)
Wilkinson, John


Roe, Mrs Marion (Broxbourne)
Willetts, David


Ross, William (E Lond'y)
Willis, Phil


Rowe, Andrew (Faversham)
Winterton, Mrs Ann (Congleton)


Ruffley, David
Winterton, Nicholas (Macclesfield)


Russell, Bob (Colchester)
Yeo, Tim


St Aubyn, Nick
Young, Rt Hon Sir George


Salmond, Alex



Sanders, Adrian
Tellers for the Noes:


Sayeed, Jonathan
Mr. John Whittingdale and


Shephard, Rt Hon Mrs Gillian
Mr. Oliver Heald.

Question accordingly agreed to.

Orders of the Day — 9. HYDROCARBON OIL (ULTRA LOW SULPHUR DIESEL)

Resolved,

That—

(1)In section 1 of the Hydrocarbon Oil Duties Act 1979, for subsection (6) there shall be substituted the following subsection—

"(6) 'Ultra low sulphur diesel' means gas oil—

(a)the sulphur content of which does not exceed 0.005 per cent. by weight or is nil;
(b)the density of which does not exceed 835 kilograms per cubic metre at a temperature of 15° C; and
(c)of which not less than 95 per cent. by volume distils at a temperature not exceeding 345° C."

(2)This Resolution shall have effect as from 6 o'clock in the evening of 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 10. HYDROCARBON OIL (MIXING OF HEAVY OIL)

Resolved,

That—

(1)In section 20AAA of the Hydrocarbon Oil Duties Act 1979, after subsection (2) there shall be inserted the following subsection—

"(2A) Where—

(a)a mixture of heavy oils is produced in contravention of Part IIA of Schedule 2A to this Act, and
(b)the mixture is not produced as a result of approved mixing,

a duty of excise shall be charged on the mixture."

(2)In subsection (3) of that section, after "subsection (1)" there shall be inserted "or (2A)".

(3)In section 20AAB of that Act, in subsection (1), after "section 20AAA(1)" there shall be inserted "or (2A)".

(4)In Schedule 2A to that Act, after paragraph 7 there shall be inserted the following paragraph—

"PART IIA

UNREBATED HEAVY OIL

7A. A mixture of heavy oils is produced in contravention of this paragraph if such a mixture is produced by mixing—

(a)ultra low sulphur diesel in respect of which, on its delivery for home use, a declaration was made that it was intended for use as fuel for a road vehicle; and

(b)heavy oil of any other description in respect of which, on its delivery for home use, such a declaration was made."


TABLE


(I)Period (in months) for which licence granted
(2)Machines that are not gaming machines
(3)Gaming machines that are small-prize machines or are five-penny machine swith out being small-prize machines
(4) Other machines



£
£
£


1
30
80
220


2
50
150
425


3
75
220
615


4
95
285
800


5
120
345
970


6
140
400
1,125


7
160
450
1,270


8
185
500
1,405


9
205
540
1,525


10
225
580
1,635


11
240
615
1,730


12
250
645
1,815

(2) This Resolution shall apply in relation to any amusement machine licence for which an application is received by the Commissioners of Customs and Excise after 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 14. AMUSEMENT MACHINE LICENCE DUTY (EXCEPTED MACHINES)

Resolved,

That—

(1) In section 21(3A) of the Betting and Gaming Duties Act 1981, for paragraphs (b) and (c) there shall be substituted the following paragraphs—

"(b) a five-penny machine which is a small prize machine; or

(5)In paragraph 9 of that Schedule, after sub-paragraph (1) there shall be inserted the following sub-paragraph—

"(1A) Subject to paragraph 10 below, duty charged under subsection (2A) of section 20AAA of this Act shall be charged at the rate for heavy oil in force at the time when the mixture is produced."

(6)This Resolution shall have effect as from 6 o'clock in the evening of 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 11. TOBACCO PRODUCTS (RATES OF DUTY)

Resolved,

That provision may be made increasing the rates of duty set out in the Table in Schedule 1 to the Tobacco Products Duty Act 1979.

Orders of the Day — 12. RATES OF GAMING DUTY

Resolved,

That provision may be made increasing the rates at which gaming duty is charged.

Orders of the Day — 13. AMUSEMENT MACHINE LICENCE DUTY (RATES OF DUTY)

Resolved,

That—

(1) In section 23 of the Betting and Gaming Duties Act 1981, for the Table in subsection (2) there shall be substituted the following Table—

(c) a thirty-five-penny machine which is not a prize machine or which, if it is a prize machine, is not a gaming machine."

(2) This Resolution has effect in relation to the provision of an amusement machine at any time on or after 1st April 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 15. VEHICLE EXCISE DUTY (OLD VEHICLES)

Resolved,

That provision may be made confining the exemption in paragraph 1A of Schedule 2 to the Vehicle Excise and Registration Act 1994 to vehicles constructed before 1st January 1973.

Orders of the Day — 16. VEHICLE EXCISE DUTY (PAYMENTS IN RESPECT OF VOID LICENCES)

Resolved,

That provision may be made amending section 35 A of the Vehicle Excise and Registration Act 1994.

Orders of the Day — 17. ASSESSMENTS FOR EXCISE DUTY PURPOSES

Resolved,

That provision may be made about assessing and recovering amounts for purposes of excise duty.

Orders of the Day — 18. VALUE ADDED TAX (DEEMED SUPPLIES)

Resolved,

That—

(1)Paragraph 5 of Schedule 4 to the Value Added Tax Act 1994 shall be amended as follows.

(2)In sub-paragraph (2)(a), for "is" there shall be substituted "of acquiring or, as the case may be, producing the goods was".

(3)After sub-paragraph (2) there shall be inserted the following sub-paragraph—

"(2A) For the purposes of determining the cost to the donor of acquiring or producing goods of which he has made a gift, where—

(a)the acquisition by the donor of the goods, or anything comprised in the goods, was by means of a transfer of a business, or a part of a business, as a going concern,
(b)the assets transferred by that transfer included those goods or that thing, and
(c)the transfer of those assets is one falling by virtue of an order under section 5(3) (or under an enactment re-enacted in section 5(3)) to be treated as neither a supply of goods nor a supply of services,

the donor and his predecessor or, as the case may be, all of his predecessors shall be treated as if they were the same person."

(4)In sub-paragraph (5), for "is" there shall be substituted "or any of his predecessors is a person who (disregarding this paragraph) has or will become".

(5)After that sub-paragraph there shall be inserted the following sub-paragraph—

"(5A) In relation to any goods or anything comprised in any goods, a person is the predecessor of another for the purposes of this paragraph if—

(a)that other person is a person to whom he has transferred assets of his business by a transfer of that business, or a part of it, as a going concern;
(b)those assets consisted of or included those goods or that thing; and
(c)the transfer of the assets is one falling by virtue of an order under section 5(3) (or under an enactment re-enacted in section 5(3)) to be treated as neither a supply of goods nor a supply of services;

and references in this paragraph to a person's predecessors include references to the predecessors of his predecessors through any number of transfers."

(6)The preceding provisions of this Resolution apply to any case where the time when the goods are transferred or disposed of or, as the case may be, put to use, used or made available for use is on or after 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 19. VALUE ADDED TAX (PLACE OF SUPPLY ORDERS)

Resolved,

That—
(1)In the Value Added Tax Act 1994 the following section shall be inserted after section 97—

"Place of supply orders: transitional provision

97A.—(1) This section shall have effect for the purpose of giving effect to any order made on or after 17th March 1998 under section 7(11), if—

(a)the order provides for services of a description specified in the order to be treated as supplied in the United Kingdom;
(b)the services would not have fallen to be so treated apart from the order;
(c)the services are not services that would have fallen to be so treated under any provision re-enacted in the order; and
(d)the order is expressed to come into force in relation to services supplied on or after a date specified in the order ('the commencement date').

(2)Invoices and other documents provided to any person before the commencement date shall be disregarded in determining the time of the supply of any services which, if their time of supply were on or after the commencement date, would be treated by virtue of the order as supplied in the United Kingdom.

(3)If there is a payment in respect of any services of the specified description that was received by the supplier before the commencement date, so much (if any) of that payment as relates to times on or after that date shall be treated as if it were a payment received on the commencement date.

(4)If there is a payment in respect of services of the specified description that is or has been received by the supplier on or after the commencement date, so much (if any) of that payment as relates to times before that date shall be treated as if it were a payment received before that date.

(5)Subject to subsection (6) below, a payment in respect of any services shall be taken for the purposes of this section to relate to the time of the performance of those services.

(6)Where a payment is received in respect of any services the performance of which takes place over a period a part of which falls before the commencement date and a part of which does not—

(a)an apportionment shall be made, on a just and reasonable basis, of the extent to which the payment is attributable to so much of the performance of those services as took place before that date;
(b)the payment shall, to that extent, be taken for the purposes of this section to relate to a time before that date; and
(c)the remainder, if any, of the payment shall be taken for those purposes to relate to times on or after that date."

(2)In section 6 of the Value Added Tax Act 1994, after subsection (14) there shall be inserted the following subsection—

"(14A) In relation to any services of a description specified in an order under section 7(11), this section and any regulations under this section or section 8(4) shall have effect subject to section 97A."

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 20. VALUE ADDED TAX (BAD DEBT RELIEF)

Resolved,

That provision may be made amending section 36 of the Value Added Tax Act 1994.

Orders of the Day — 21. VALUE ADDED TAX (LONG LEASES IN SCOTLAND)

Resolved,

That provision may be made amending section 96 of the Value Added Tax Act 1994.

Orders of the Day — 22. INCOME TAX (CHARGE AND RATES FOR 1998–99)

Motion made, and Question put,

That income tax shall be charged for the year 1998–99, and for that year—

(a)the lower rate shall be 20 per cent.;
(b)the basic rate shall be 23 per cent.; and
(c)the higher rate shall be 40 per cent.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

The House proceeded to a Division—

Mr. Nick St. Aubyn (Guildford) (seated and covered): On a point of order, Madam Speaker. I am afraid that I have not been present throughout the debate, but I know that the Liberal Democrats have criticised not only this Government but the previous Government time and again for raising taxes—

Madam Speaker: Order. That is not a point of order for the Chair. Continue with the Division.

The House having divided: Ayes 300, Noes 43.

Division No. 218]
[10.27 pm


AYES


Abbott, Ms Diane
Canavan, Dennis


Ainger, Nick
Cann, Jamie


Ainsworth, Robert (Cov'try NE)
Caplin, Ivor


Allen, Graham
Caton, Martin


Anderson, Donald (Swansea E)
Chaytor, David


Anderson, Janet (Rossendale)
Chisholm, Malcolm


Armstrong, Ms Hilary
Church, Ms Judith


Ashton, Joe
Clapham, Michael


Atherton, Ms Candy
Clark, Rt Hon Dr David (S Shields)


Barnes, Harry
Clark, Dr Lynda (Edinburgh Pentlands)


Barron, Kevin


Battle, John
Clarke, Rt Hon Tom (Coatbridge)


Bayley, Hugh
Clelland, David


Beckett, Rt Hon Mrs Margaret
Clwyd, Ann


Bell, Stuart (Middlesbrough)
Coaker, Vernon


Benn, Rt Hon Tony
Coffey, Ms Ann


Bennett, Andrew F
Cohen, Harry


Benton, Joe
Coleman, lain


Bermingham, Gerald
Colman, Tony


Berry, Roger
Connarty, Michael


Best, Harold
Cook, Frank (Stockton N)


Blears, Ms Hazel
Cooper, Yvette


Blizzard, Bob
Corbett, Robin


Blunkett, Rt Hon David
Corbyn, Jeremy


Borrow, David
Corston, Ms Jean


Bradley, Peter (The Wrekin)
Cousins, Jim


Brinton, Mrs Helen
Cox, Tom


Brown, Rt Hon Gordon (Dunfermline E)
Cryer, John (Hornchurch)



Cummings, John


Brown, Rt Hon Nick (Newcastle E)
Cunliffe, Lawrence


Brown, Russell (Dumfries)
Cunningham, Jim (Cov'try S)


Browne, Desmond
Dalyell, Tam


Buck, Ms Karen
Darling, Rt Hon Alistair


Burden, Richard
Darvill, Keith


Burgon, Colin
Davey, Valerie (Bristol W)


Byers, Stephen
Davidson, Ian


Caborn, Richard
Davies, Rt Hon Denzil (Llanelli)


Campbell, Alan (Tynemouth)
Davies, Rt Hon Ron (Caerphilly)


Campbell—Savours, Dale
Dawson, Hilton





Dean, Mrs Janet
Kaufman, Rt Hon Gerald


Denham, John
Keeble, Ms Sally


Dismore, Andrew
Kemp, Fraser


Dobson, Rt Hon Frank
Kennedy, Jane (Wavertree)


Donohoe, Brian H
Kidney, David


Doran, Frank
King, Andy (Rugby & Kenilworth)


Dowd, Jim
King, Ms Oona (Bethnal Green)


Drew, David
Kumar, Dr Ashok


Drown, Ms Julia
Ladyman, Dr Stephen


Dunwoody, Mrs Gwyneth
Lawrence, Ms Jackie


Eagle, Maria (L'pool Garston)
Laxton, Bob


Edwards, Huw
Lepper, David


Ellman, Mrs Louise
Levitt, Tom


Ennis, Jeff
Lewis, Ivan (Bury S)


Field, Rt Hon Frank
Lewis, Terry (Worsley)


Fisher, Mark
Lock, David


Fitzpatrick, Jim
Love, Andrew


Fitzsimons, Lorna
McAvoy, Thomas


Flint, Caroline
McCabe, Steve


Flynn, Paul
McCartney, Ian (Makerfield)


Foster, Rt Hon Derek
McDonagh, Siobhain


Foster, Michael J (Worcester)
Macdonald, Calum


Foulkes, George
McDonnell, John


Fyfe, Maria
McFall, John


Galbraith, Sam
McGuire, Mrs Anne


Galloway, George
Mclsaac, Shona


Gapes, Mike
McKenna, Mrs Rosemary


George, Bruce (Walsall S)
McLeish, Henry


Gibson, Dr Ian
McNulty, Tony


Gilroy, Mrs Linda
MacShane, Denis


Godman, Norman A
Mactaggart, Fiona


Golding, Mrs Llin
McWilliam, John


Graham, Thomas
Mahon, Mrs Alice


Grant, Bernie
Mandelson, Peter


Griffiths, Jane (Reading E)
Marek, Dr John


Grocott, Bruce
Marsden, Paul (Shrewsbury)


Grogan, John
Marshall—Andrews, Robert


Gunnell, John
Martlew, Eric


Hain, Peter
Maxton, John


Hall, Mike (Weaver Vale)
Meale, Alan


Hall, Patrick (Bedford)
Michael, Alun


Hanson, David
Michie, Bill (Shef'ld Heeley)


Harman, Rt Hon Ms Harriet
Milburn, Alan


Heal, Mrs Sylvia
Miller, Andrew


Healey, John
Mitchell, Austin


Henderson, Doug (Newcastle N)
Moffatt, Laura


Henderson, Ivan (Harwich)
Moonie, Dr Lewis


Hepburn, Stephen
Moran, Ms Margaret


Heppell, John
Morgan, Ms Julie (Cardiff N)


Hewitt, Ms Patricia
Morgan, Rhodri (Cardiff W)


Hill, Keith
Morris, Ms Estelle (B'ham Yardley)


Hinchliffe, David
Morris, Rt Hon John (Aberavon)


Hodge, Ms Margaret
Mudie, George


Hoey, Kate
Mullin, Chris


Home Robertson, John
Murphy, Denis (Wansbeck)


Hope, Phil
Naysmith, Dr Doug


Hopkins, Kelvin
O'Hara, Eddie


Howarth, Alan (Newport E)
Olner, Bill


Howarth, George (Knowsley N)
O'Neill, Martin


Howells, Dr Kim
Palmer, Dr Nick


Hoyle, Lindsay
Pendry, Tom


Hughes, Kevin (Doncaster N)
Perham, Ms Linda


Humble, Mrs Joan
Pickthall, Colin


Hurst, Alan
Pike, Peter L


Hutton, John
Plaskitt, James


Iddon, Dr Brian
Pope, Greg


Jackson, Helen (Hillsborough)
Powell, Sir Raymond


Jamieson, David
Prentice, Ms Bridget (Lewisham E)


Johnson, Alan (Hull W & Hessle)
Prescott, Rt Hon John


Johnson, Miss Melanie (Welwyn Hatfield)
Primarolo, Dawn


Prosser, Gwyn


Jones, Barry (Alyn & Deeside)
Purchase, Ken


Jones, Helen (Warrington N)
Quin, Ms Joyce


Jones, Ms Jenny (Wolverh'ton SW)
Quinn, Lawrie


Radice, Giles


Jones, Martyn (Clwyd S)
Rapson, Syd






Raynsford, Nick
Taylor, Rt Hon Mrs Ann (Dewsbury)


Reed, Andrew (Loughborough)



Reid, Dr John (Hamilton N)
Taylor, Ms Dari (Stockton S)


Robertson, Rt Hon George (Hamilton S)
Taylor, David (NW Leics)



Temple—Morris, Peter


Robinson, Geoffrey (Cov'try NW)
Thomas, Gareth (Clwyd W)


Rogers, Allan
Thomas, Gareth R (Harrow W)


Rooney, Terry
Timms, Stephen


Ross, Ernie (Dundee W)
Tipping, Paddy


Rowlands, Ted
Todd, Mark


Roy, Frank
Touhig, Don


Ruddock, Ms Joan
Trickett, Jon


Russell, Ms Christine (Chester)
Truswell, Paul


Ryan, Ms Joan
Turner, Dennis (Wolverh'ton SE)


Savidge, Malcolm
Turner, Dr Desmond (Kemptown)


Sedgemore, Brian
Twigg, Derek (Halton)


Shaw, Jonathan
Twigg, Stephen (Enfield)


Sheerman, Barry
Vaz, Keith


Sheldon, Rt Hon Robert
Walley, Ms Joan


Simpson, Alan (Nottingham S)
Wareing, Robert N


Skinner, Dennis
Watts, David


Smith, Rt Hon Andrew (Oxford E)
White, Brian


Smith, Angela (Basildon)
Whitehead, Dr Alan


Smith, Rt Hon Chris (Islington S)
Wicks, Malcolm


Smith, Miss Geraldine (Morecambe & Lunesdale)
Williams, Rt Hon Alan



(Swansea W)


Smith, Jacqui (Redditch)
Williams, Mrs Betty (Conwy)


Smith, John (Glamorgan)
Wills, Michael


Smith, Llew (Blaenau Gwent)
Wilson, Brian


Soley, Clive
Winnick, David


Spellar, John
Winterton, Ms Rosie (Doncaster C)


Squire, Ms Rachel
Wise, Audrey


Starkey, Dr Phyllis
Woolas, Phil


Steinberg, Gerry
Wray, James


Stevenson, George
Wright, Anthony D (Gt Yarmouth)


Stinchcombe, Paul
Wright, Dr Tony (Cannock)


Stoate, Dr Howard
Wyatt, Derek


Strang, Rt Hon Dr Gavin



Straw, Rt Hon Jack
Tellers for the Ayes:


Stringer, Graham
Mr. Jon Owen Jones and


Sutcliffe, Gerry
Mr. Clive Betts.


NOES


Allan, Richard
Hughes, Simon (Southwark N)


Ashdown, Rt Hon Paddy
Jones, Nigel (Cheltenham)


Baker, Norman
Keetch, Paul


Ballard, Mrs Jackie
Kennedy, Charles (Ross Skye)


Berth, Rt Hon A J
Kirkwood, Archy


Bell, Martin (Tatton)
Livsey, Richard


Brake, Tom
Llwyd, Elfyn


Brand, Dr Peter
Maclennan, Rt Hon Robert


Breed, Colin
Oaten, Mark


Bruce, Malcolm (Gordon)
Õpik, Lembit


Burnett, John
Rendel, David


Burstow, Paul
Russell, Bob (Colchester)


Cable, Dr Vincent
Sanders, Adrian


Campbell, Menzies (NE Fife)
Smith, Sir Robert (W Ab'd'ns)


Chidgey, David
Taylor, Matthew (Truro)



Tonge, Dr Jenny


Dafis, Cynog
Tyler, Paul


Feam, Ronnie
Wallace, James


Foster, Don (Bath)
Webb, Steve


George, Andrew (St Ives)
Willis, Phil


Gorrie, Donald



Hancock, Mike
Tellers for the Noes:


Harris, Dr Evan
Mr. Edward Davey and


Heath, David (Somerton & Frome)
Mr. Andrew Stunell.

Question accordingly agreed to.

Orders of the Day — 23. INCOME TAX (ADDITIONAL RELIEF IN RESPECT OF CHILDREN)

Resolved,

That—

(1) In subsection (l)(c) of section 259 of the Income and Corporation Taxes Act 1988, for "man" and "wife" there shall be substituted, respectively, "individual" and "spouse".

(2) In subsection (4) of that section, after "relief under this section" there shall be inserted "by virtue of subsection (l)(a) above".

(3) In section 261A(3) of that Act, for "a man" there shall be substituted "an individual".

(4) This Resolution has effect for the year 1997–98 and subsequent years of assessment.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 24. CORPORATION TAX (CHARGE AND RATE FOR 1998)

Resolved,

That, for the financial year 1998, corporation tax shall be charged at the rate of 31 per cent.

Orders of the Day — 25. CORPORATION TAX (SMALL COMPANIES RATE FOR 1998)

Resolved,

That, for the financial year 1998—

(a) the small companies' rate shall be 21 per cent.; and
(b) the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988 shall be one fortieth.

Orders of the Day — 26. CORPORATION TAX (DUE AND PAYABLE DATE)

Motion made, and Question put,

That provision may be made for and in connection with altering the date on which corporation tax and amounts treated as corporation tax become due and payable.

The House divided: Ayes 339, Noes 147.

Division No. 219]
[10.39 pm


AYES


Abbott, Ms Diane
Brown, Russell (Dumfries)


Ainger, Nick
Browne, Desmond


Ainsworth, Robert (Cov'try NE)
Bruce, Malcolm (Gordon)


Allan, Richard
Buck, Ms Karen


Allen, Graham
Burden, Richard


Anderson, Donald (Swansea E)
Burgon, Colin


Armstrong, Ms Hilary
Burnett, John


Ashdown, Rt Hon Paddy
Burstow, Paul


Ashton, Joe
Byers, Stephen


Atherton, Ms Candy
Cable, Dr Vincent


Baker, Norman
Cabom, Richard


Ballard, Mrs Jackie
Campbell, Alan (Tynemouth)


Barnes, Harry
Campbell, Menzies (NE Fife)


Barron, Kevin
Campbell-Savours, Dale


Battle, John
Canavan, Dennis


Bayley, Hugh
Cann, Jamie


Beckett, Rt Hon Mrs Margaret
Caplin, Ivor


Berth, Rt Hon A J
Caton, Martin


Bell, Martin (Tatton)
Chaytor, David


Bell, Stuart (Middlesbrough)
Chidgey, David


Benn, Rt Hon Tony
Chisholm, Malcolm


Bennett, Andrew F
Church, Ms Judith


Benton, Joe
Clapham, Michael


Bermingham, Gerald
Clark, Rt Hon Dr David (S Shields)


Berry, Roger
Clark, Dr Lynda(Edinburgh Pentlands)


Best, Harold



Betts, Clive
Clarke, Rt Hon Tom (Coatbridge)


Blears, Ms Hazel
Clelland, David


Blizzard, Bob
Clwyd, Ann


Blunkett, Rt Hon David
Coaker, Vernon


Borrow, David
Coffey, Ms Ann


Bradley, Peter (The Wrekin)
Cohen, Harry


Brake, Tom
Coleman, lain


Brand, Dr Peter
Colman, Tony


Breed, Colin
Connarty, Michael


Brown, Rt Hon Gordon (Dunfermline E)
Cook, Frank (Stockton N)



Cooper, Yvette


Brown, Rt Hon Nick (Newcastle E)
Corbett, Robin






Corbyn, Jeremy
Hoey, Kate


Corston, Ms Jean
Home Robertson, John


Cousins, Jim
Hope, Phil


Cox, Tom
Hopkins, Kelvin


Cryer, John (Homchurch)
Howarth, Alan (Newport E)


Cummings, John
Howarth, George (Knowsley N)


Cunliffe, Lawrence
Howells, Dr Kim


Cunningham, Jim (Cov'try S)
Hoyle, Lindsay


Dalyell, Tarn
Hughes, Kevin (Doncaster N)


Darling, Rt Hon Alistair
Hughes, Simon (Southwark N)


Darvill, Keith
Humble, Mrs Joan


Davey, Edward (Kingston)
Hurst, Alan


Davey, Valerie (Bristol W)
Hutton, John


Davidson, Ian
Iddon, Dr Brian


Davies, Rt Hon Denzil (Llanelli)
Jackson, Helen (Hillsborough)


Davies, Rt Hon Ron (Caerphilly)
Jamieson, David


Dawson, Hilton
Johnson, Alan (Hull W & Hessle)


Dean, Mrs Janet
Johnson, Miss Melanie


Denham, John
(Welwyn Hatfield)


Dismore, Andrew
Jones, Barry (Alyn & Deeside)


Dobson, Rt Hon Frank
Jones, Helen (Warrington N)


Donohoe, Brian H
Jones, Ms Jenny (Wolverh'ton SW)


Doran, Frank



Drew, David
Jones, Jon Owen (Cardiff C)


Drown, Ms Julia
Jones, Martyn (Clwyd S)


Dunwoody, Mrs Gwyneth
Jones, Nigel (Cheltenham)


Eagle, Maria (L'pool Garston)
Kaufman, Rt Hon Gerald


Edwards, Huw
Keeble, Ms Sally


Ellman, Mrs Louise
Keetch, Paul


Ennis, Jeff
Kemp, Fraser


Fearn, Ronnie
Kennedy, Charles (Ross Skye)


Field, Rt Hon Frank
Kennedy, Jane (Wavertree)


Fisher, Mark
Kidney, David


Fitzpatrick, Jim
King, Andy (Rugby & Kenilworth)


Fitzsimons, Lorna
King, Ms Oona (Bethnal Green)


Flint, Caroline
Kirkwood, Archy


Flynn, Paul
Kumar, Dr Ashok


Foster, Rt Hon Derek
Ladyman, Dr Stephen


Foster, Don (Bath)
Lawrence, Ms Jackie


Foster, Michael J (Worcester)
Laxton, Bob


Foulkes, George
Lepper, David


Fyfe, Maria
Levitt, Tom


Galbraith, Sam
Lewis, Ivan (Bury S)


Galloway, George
Lewis, Terry (Worsley)


Gapes, Mike
Livsey, Richard


George, Andrew (St Ives)
Lock, David


George, Bruce (Walsall S)
Love, Andrew


Gibson, Dr Ian
McAvoy, Thomas


Gilroy, Mrs Linda
McCabe, Steve


Godman, Norman A
McDonagh, Siobhain


Golding, Mrs Llin
Macdonald, Calum


Gorrie, Donald
McDonnell, John


Graham, Thomas
McFall, John


Grant, Bernie
McGuire, Mrs Anne


Griffiths, Jane (Reading E)
Mclsaac, Shona


Grocott, Bruce
McKenna, Mrs Rosemary


Grogan, John
McLeish, Henry


Gunnell, John
Maclennan, Rt Hon Robert


Hain, Peter
McNulty, Tony


Hall, Mike (Weaver Vale)
MacShane, Denis


Hall, Patrick (Bedford)
Mactaggart, Fiona


Hancock, Mike
McWilliam, John


Hanson, David
Mahon, Mrs Alice


Harman, Rt Hon Ms Harriet
Mandelson, Peter


Harris, Dr Evan
Marek, Dr John


Heal, Mrs Sylvia
Marsden, Paul (Shrewsbury)


Healey, John
Marshall—Andrews, Robert


Heath, David (Somerton & Frome)
Martlew, Eric


Henderson, Doug (Newcastle N)
Maxton, John


Henderson, Ivan (Harwich)
Meale, Alan


Hepburn, Stephen
Michael, Alun


Heppell, John
Michie, Bill (Shef'ld Heeley)


Hewitt, Ms Patricia
Milbum, Alan


Hill, Keith
Miller, Andrew


Hinchliffe, David
Mitchell, Austin


Hodge, Ms Margaret
Moffatt, Laura





Moonie, Dr Lewis
Smith, John (Glamorgan)


Moran, Ms Margaret
Smith, Llew (Blaenau Gwent)


Morgan, Ms Julie (Cardiff N)
Smith, Sir Robert (WAb'd'ns)


Morgan, Rhodri (Cardiff W)
Soley, Clive


Morris, Ms Estelle (B'ham Yardley)
Spellar, John


Morris, Rt Hon John (Aberavon)
Squire, Ms Rachel


Mudie, George
Starkey, Dr Phyllis


Mullin, Chris
Steinberg, Gerry


Murphy, Denis (Wansbeck)
Stevenson, George


Naysmith, Dr Doug
Stinchcombe, Paul


Oaten, Mark
Stoate, Dr Howard


O'Hara, Eddie
Strang, Rt Hon Dr Gavin


Olner, Bill
Straw, Rt Hon Jack


O'Neill, Martin
Stringer, Graham


Öpik, Lembit
Stunell, Andrew


Palmer, Dr Nick
Sutcliffe, Gerry


Pendry, Tom
Taylor, Rt Hon Mrs Ann


Perham, Ms Linda
(Dewsbury)


Pickthall, Colin
Taylor, Ms Dari (Stockton S)


Pike, Peter L
Taylor, David (NW Leics)


Plaskitt, James
Taylor, Matthew (Truro)


Pope, Greg
Temple-Morris, Peter


Powell, Sir Raymond
Thomas, Gareth (Clwyd W)


Prentice, Ms Bridget (Lewisham E)
Thomas, Gareth R (Harrow W)


Primarolo, Dawn
Timms, Stephen


Prosser, Gwyn
Tipping, Paddy


Purchase, Ken
Todd, Mark


Quin, Ms Joyce
Tonge, Dr Jenny


Quinn, Lawrie
Touhig, Don


Radice, Giles
Trickett, Jon


Rapson, Syd
Truswell, Paul


Raynsford, Nick
Turner, Dennis (Wolverh'ton SE)


Reed, Andrew (Loughborough)
Turner, Dr Desmond (Kemptown)


Reid, Dr John (Hamilton N)
Twigg, Derek (Halton)


Rendel, David
Twigg, Stephen (Enfield)



Tyler Paul


Robertson, Rt Hon George (Hamilton S)
Vaz, Keith



Wallace, James


Robinson, Geoffrey (Cov'try NW)




Walley, Ms Joan


Rogers, Allan
Wareing, Robert N


Rooney, Terry
Watts, David


Ross, Ernie (Dundee W)
Webb, Steve


Rowlands, Ted
White, Brian


Roy, Frank
Whitehead, Dr Alan


Ruddock, Ms Joan
Wicks, Malcolm


Russell, Bob (Colchester)
Williams, Rt Hon Alan


Russell, Ms Christine (Chester)
(Swansea W)


Ryan, Ms Joan
Williams, Mrs Betty (Conwy)


Sanders, Adrian
Willis, Phil


Savidge, Malcolm
Wills, Michael


Sedgemore, Brian
Wilson, Brian


Shaw, Jonathan
Winnick, David


Sheerman, Barry
Winterton, Ms Rosie (Doncaster C)


Sheldon, Rt Hon Robert
Wise, Audrey


Simpson, Alan (Nottingham S)
Woolas, Phil


Skinner, Dennis
Wray, James


Smith, Rt Hon Andrew (Oxford E)
Wright, Anthony D (Gt Yarmouth)


Smith, Angela (Basildon)
Wright, Dr Tony (Cannock)


Smith, Rt Hon Chris (Islington S)



Smith, Miss Geraldine (Morecambe & Lunesdale)
Tellers for the Ayes:



Janet Anderson and


Smith, Jacqui (Redditch)
Mr. Jim Dowd.


NOES


Ainsworth, Peter (E Surrey)
Brady, Graham


Ancram, Rt Hon Michael
Brazier, Julian


Arbuthnot, James
Brooke, Rt Hon Peter


Atkinson, Peter (Hexham)
Browning, Mrs Angela


Baldry, Tony
Bruce, lan (S Dorset)


Bercow, John
Burns, Simon


Beresford, Sir Paul
Butterfill, John


Blunt, Crispin
Cash, William


Body, Sir Richard
Chapman, Sir Sydney (Chipping Barnet)


Boswell, Tim



Bottomley, Peter (Worthing W)
Chope, Christopher


Bottomley, Rt Hon Mrs Virginia
Clappison, James






Clark, Rt Hon Alan (Kensington)
MacKay, Andrew


Clark, Dr Michael (Rayleigh)
Maclean, Rt Hon David


Clarke, Rt Hon Kenneth
McLoughlin, Patrick


(Rushcliffe)
Madel, Sir David


Collins, Tim
Major, Rt Hon John


Colvin, Michael
Malins, Humfrey


Cormack, Sir Patrick
Mates, Michael


Cran, James
Maude, Rt Hon Francis


Curry, Rt Hon David
Mawhinney, Rt Hon Sir Brian


Dafis, Cynog
May, Mrs Theresa


Davis, Rt Hon David (Haltemprice)
Moss, Malcolm


Day, Stephen
Nicholls, Patrick


Dorrell, Rt Hon Stephen
Norman, Archie


Duncan, Alan
Ottaway, Richard


Duncan Smith, lain
Page, Richard


Emery, Rt Hon Sir Peter
Paice, James


Evans, Nigel
Paterson, Owen


Faber, David
Pickles, Eric


Fabricant, Michael
Prior, David


Fallon, Michael
Randall, John


Flight, Howard
Redwood, Rt Hon John


Forth, Rt Hon Eric
Robathan, Andrew


Fowler, Rt Hon Sir Norman
Robertson, Laurence (Tewk'b'ry)


Fraser, Christopher
Roe, Mrs Marion (Broxbourne)


Gibb, Nick
Ross, William (E Londy)


Gill, Christopher
Rowe, Andrew (Faversham)


Gillan, Mrs Cheryl
Ruffley, David


Goodlad, Rt Hon Sir Alastair
St Aubyn, Nick


Gray, James
Sayeed, Jonathan


Green, Damian
Shephard, Rt Hon Mrs Gillian


Greenway, John
Simpson, Keith (Mid-Norfolk)


Grieve, Dominic
Smyth, Rev Martin (Belfast S)


Gummer, Rt Hon John
Soames, Nicholas


Hamilton, Rt Hon Sir Archie
Spelman, Mrs Caroline


Hammond, Philip
Spicer, Sir Michael


Hayes, John
Spring, Richard


Heath, Rt Hon Sir Edward
Stanley, Rt Hon Sir John


Heathcoat—Amory, Rt Hon David
Streeter, Gary


Heseltine, Rt Hon Michael
Swayne, Desmond


Hogg, Rt Hon Douglas
Syms, Robert


Horam, John
Tapsell, Sir Peter


Howard, Rt Hon Michael
Taylor, Ian (Esher& Walton)


Hunter, Andrew
Taylor, Rt Hon John D (Strangford)


Jack, Rt Hon Michael
Taylor, John M (Solihull)


Jackson, Robert (Wantage)
Taylor, Sir Teddy


Jenkin, Bernard
Townend, John


Johnson Smith,
Tredinnick, David


Rt Hon Sir Geoffrey
Trend, Michael


Key, Robert
Tyrie, Andrew


King, Rt Hon Tom (Bridgwater)
Viggers, Peter


Kirkbride, Miss Julie
Walter, Robert


Laing, Mrs Eleanor
Waterson, Nigel


Lansley, Andrew
Wells, Bowen


Leigh, Edward
Whitney, Sir Raymond


Letwin, Oliver
Widdecombe, Rt Hon Miss Ann


Lewis, Dr Julian (New Forest E)
Wilkinson, John


Lidington, David
Willetts, David


Lilley, Rt Hon Peter
Winterton, Mrs Ann (Congleton)


Lloyd, Rt Hon Sir Peter (Fareham)
Winterton, Nicholas (Macclesfield)


Llwyd, Elfyn
Yeo, Tim


Loughton, Tim
Young, Rt Hon Sir George


Luff, PeterLyell, Rt Hon Sir Nicholas
Tellers for the Noes:


MacGregor, Rt Hon John
Mr. John Whittingdale and


McIntosh, Miss Anne
Mr. Oliver Heald

Question accordingly agreed to.

Orders of the Day — 27. ADVANCE CORPORATION TAX AND TAX CREDITS Resolved,

That provision may be made in relation to—

(a)the set-off of advance corporation tax against liability to
corporation tax; and
(b) tax credits.

Orders of the Day — 28. INTEREST PAYABLE UNDER THE TAX ACTS Resolved,

That provision may be made imposing charges to tax in relation to interest payable under the Tax Acts to companies.

Orders of the Day — 29. RENTS AND OTHER RECEIPTS FROM LAND

Resolved,
That provision may be made about the taxation of rents and other receipts from land.

Orders of the Day — 30. COMPUTATION OF PROFITS AND LOSSES

Resolved,
That provision may be made as to the computation of profits and losses for tax purposes.

Orders of the Day — 31. REMUNERATION IN THE FORM OF SHARES OR SECURITIES

Resolved,
That provision may be made about shares or securities acquired by a person as a director or employee.

Orders of the Day — 32. SUB-CONTRACTORS IN THE CONSTRUCTION INDUSTRY

Resolved,
That provision may be made amending Chapter IV of Part XIII of the Income and Corporation Taxes Act 1988.

Orders of the Day — 33. CONSTRUCTION WORKERS SUPPLIED BY AGENCIES

Resolved,
That—

(1)In section 134 of the Income and Corporation Taxes Act 1988, subsection (5)(c) shall cease to have effect.
(2) In section 559 of the Income and Corporation Taxes Act 1988, in subsection (1), for "subsection (2) below" there shall be substituted "the following provisions of this section"; and after subsection (1) there shall be inserted the following subsection—

"(1A) Subsection (1) above shall not apply to any payment made under the contract in question that is chargeable to income tax under Schedule E by virtue of section 134(1)."

(3)Paragraphs (1) and (2) above have effect in relation to—

(a) any payments made on or after 6th April 1998 other than
any made in respect of services rendered before that date; and
(b) any payments made before 6th April 1998 in respect of
services to be rendered on or after that date.

(4) Subject to paragraph (9) below, paragraph (5) below applies if—

(a) a construction trade is being carried on by a person ('the)
sub-contractor') at the end of the year 1997–98; and
(b) there are receipts of that trade which, but for section
134(5)(c) of the Income and Corporation Taxes Act 1988, would have fallen to be treated for the year 1997–98 as the emoluments of an office or employment.

(5)Where this paragraph applies, then, subject to paragraphs (7) and (8) below—

(a) the trade shall be deemed to have been permanently discontinued at the end of the year 1997–98; and
(b) to the extent (if any) that the trade includes activities in

addition to the rendering of services falling by virtue of this Resolution to be treated as the duties of an office or employment, a new trade shall be deemed to have been set up and commenced on 6th April 1998.

(6) Paragraph (7) below applies if—

(a) a construction trade ("the old trade") is deemed by virtue of paragraph (5)(a) above to have been permanently discontinued; and
(b) a construction trade ("the new trade")—



(i) is deemed by virtue of paragraph (5)(b) above to have been set up and commenced; or
(ii) (where sub-paragraph (i) above does not apply) is actually set up and commenced in the year 1998–99.

(7) Where this paragraph applies then, notwithstanding the deemed discontinuance, the old trade and the new trade shall be treated as the same for the purposes of section 385 of the Income and Corporation Taxes Act 1988.

(8) An officer of the Board shall not become entitled by virtue of anything in this Resolution to give a direction under paragraph 3(2) of Schedule 20 to the Finance Act 1994 in the case of a person whose trade is deemed under paragraph (5) above to cease on 5th April 1998.

(9) Paragraph (5) above does not apply if the sub-contractor by notice to an officer of the Board otherwise elects.

(10) An election under paragraph (9) above—

(a) if it relates to a trade carried on by an individual, must
be included in a return under section 8 of the Taxes Management Act 1970 which is made and delivered in that individual's case on or before the day on which it is required to be made and delivered under that section; and
(b) if it relates to a trade carried on by persons in partnership,
must be included in a return under section 12AA of that Act which is made and delivered in the partners' case,

TABLE A


Cylinder capacity of car in cubic centimeters
Cash equivalent


1,400 or less … … … … … … … … …
£1,010


More than 1,400 but not more than 2,000 … …
£1,280


More than 2,000 … … … … … … …
£1,890

TABLE AB


Cylinder capacity of car in cubic centimeters
Cash equivalent


2,000 or less … … … … … … … … …>
£1,280


More than 2,000 … … … … … … … … …
£1,890

TABLE B


Description of car
Cash equivalent


Any car … … … … … … … … … …
£1,890

(2) This Resolution shall have effect for the year 1998–99 and subsequent years of assessment.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 36. TRAVELLING EXPENSES

Resolved,
That provision may be made amending section 198(1) of the Income and Corporation Taxes Act 1988 and related provisions.

Orders of the Day — 37. PROFIT-RELATED PAY

Resolved,
That provision may be made about cases where profit periods for the purposes of profit-related pay overlap or are to be taken to overlap.

Orders of the Day — 38. FOREIGN EARNINGS DEDUCTION

Resolved,
That—

(1) Section 193(1) of the Income and Corporation Taxes Act 1988 shall cease to have effect.

or in the case of any one or more of them, on or before the day specified in relation to that return under subsection (2) or (3) of that section.

(11) In this Resolution "construction trade" means a trade consisting in or including the rendering of services under contracts relating to construction operations (within the meaning of Chapter IV of Part XIII of the Income and Corporation Taxes Act 1988).

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 34. EMPLOYMENT TERMINATION BENEFITS AND RETIREMENT BENEFITS

Resolved,
That provision may be made about the taxation of benefits received—

(a) in connection with the termination, or a change in the duties of, an office or employment; or
(b) under a non-approved retirement benefits scheme.

Orders of the Day — 35. BENEFITS IN KIND (CAR FUEL)

Resolved,
That—

(1) In section 158 of the Income and Corporation Taxes Act 1988, for the Tables in subsection (2) there shall be substituted—

(2) Before that section there shall be inserted—

"Foreign earnings deduction for seafarers

192A.—(1) Where in any year of assessment—

(a) the duties of an employment as a seafarer are performed wholly or partly outside the United Kingdom, and
(b) any of those duties are performed in the course of a qualifying period (within the meaning of Schedule 12) which falls wholly or partly in that year and consists of at least 365 days,

then, in charging tax under Case I of Schedule E on the amount of the emoluments from that employment attributable to that period, or to so much of it as falls in that year of assessment, there shall be allowed a deduction equal to the whole of that amount.

(2) In subsection (1) employment 'as a seafarer' means an employment consisting of the performance of duties on a ship (or of such duties and others incidental to them).

(3) For the purposes of this section a 'ship' does not include—

(a) any offshore installation within the meaning of the Mineral Workings (Offshore Installations) Act 1971, or
(b) what would be such an installation if the references in that Act to controlled waters were to any waters.

(4) Schedule 12 has effect for the purpose of supplementing this section.".

(3) The references in the Income and Corporation Taxes Act 1988 to section 193(1) shall be amended as follows—

(a) in section 19(1), in Case I of Schedule E, the words from"and to section 193(1)" to the end shall be omitted;
(b) in paragraph 10 of Schedule 11, after "193(1)" there shall be inserted "or 192A";
(c) in section 132(3) and paragraphs 1, 1A, 2(1), 3(1) and
(3), 5 and 6 of Schedule 12, for "193(1)" there shall be substituted "192A".

(4) In Schedule 12 to that Act—

(a) in paragraph 3(2)—

(i) in paragraph (a) for "62" there shall be substituted "183", and
(ii) in paragraph (b) for "one-sixth" there shall be substituted "one-half;

(b) in paragraph 5—

(i) for "vessel or aircraft" there shall be substituted "ship (within the meaning of section 192A)", and
(ii) in paragraphs (a) and (b) for "voyage or journey" there shall be substituted "voyage"; and

(c) paragraphs 3(2A) and 7 shall be omitted.

(5) Paragraphs (1) to (4) of this Resolution shall have effect in relation to—

(a) emoluments attributable to qualifying periods beginning
on or after 17th March 1998, and
(b) emoluments attributable to qualifying periods beginning before 17th March 1998 which are received on or after that date.

(6) Nothing in those paragraphs shall affect the question what deduction (if any) falls to be made under section 193(1) of the Income and Corporation Taxes Act 1988 in the case of emoluments attributable to a qualifying period beginning before 17th March 1998 and received before that date.

(7) For the purposes of paragraphs (5) and (6) of this Resolution the question whether emoluments are attributable to a qualifying period beginning before 17th March 1998 shall be determined without reference to any arrangements entered into on or after that date.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 39. PA YE (TRADE DEBTS)

Resolved,

That—

(1) In relation to any asset provided on or after 2nd July 1997 and before 6th April 1998, section 203F of the Income and Corporation Taxes Act 1988 shall have effect with the following two modifications.

(2) The first modification is the insertion in subsection (2), before the word "and" at the end of paragraph (b), of the following paragraph—

"(ba) an asset not falling within paragraph (a) or (b) above which consists in the rights of an assignee, or any other rights, in respect of a trade debt that is or may become due to the employer;".

(3) The second modification is the insertion in subsection (3), before the word "and" at the end of paragraph (a), of the following paragraph—

"(aa) in the case of an asset falling within subsection (2)(ba) above, the amount of the debt;".

(4) The preceding provisions of this Resolution shall be deemed, in accordance with paragraphs (5) and (6) below, to have come into force on 2nd July 1997.

(5) Subject to paragraph (6) below, this Resolution shall not be taken to have changed—

(a) the amounts which were deductible by any person under
section 203 of the Income and Corporation Taxes Act 1988 at any time on or before 17th March 1998; or
(b) the amounts which should have been accounted for to the Board under section 203J(3) of that Act at any time on or before 5th April 1998.

(6) Where, by virtue of this Resolution, any employer would (but for paragraph (5) above) be treated as having been under an obligation at any time on or before 17th March 1998 to make deductions from payments made by the employer of, or on account of, an employee's assessable income—

(a) sections 203 and 203J of the Income and Corporation Taxes Act 1988, and
(b) the provisions of any regulations under section 203 of that Act,

shall have effect as if the employer were obliged (subject to section 203J(3) of that Act) to make those deductions from any payments that are so made on or after 24th March 1998 and before 6th April 1998.

(7) Expressions used in paragraph (6) above and in section 203J of the Income and Corporation Taxes Act 1988 have the same meanings in that paragraph as in that section.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 40. PA YE (NON-CASH BENEFITS ETC.)

Resolved,

That provision may be made—

(a) extending the circumstances in which a person is to be treated for the purposes of PA YE regulations as having made a payment; and
(b) amending section 144A of the Income and Corporation Taxes Act 1988.

Orders of the Day — 41. ENTERPRISE INVESTMENT SCHEME ETC

Resolved,

That provision (including provision having retrospective effect) may be made amending Chapter III of Part VII of the Income and Corporation Taxes Act 1988 and sections 150, 150A and 150B of, and Schedule 5B to, the Taxation of Chargeable Gains Act 1992.

Orders of the Day — 42. VENTURE CAPITAL TRUSTS

Resolved,

That provision (including provision having retrospective effect) may be made amending section 842AA of, and Schedules 15B and 28B to, the Income and Corporation Taxes Act 1988.

Orders of the Day — 43. RELIEF FOR LOAN TO BUY INTEREST IN CLOSE COMPANY

Resolved,

That provision may be made amending section 360 of the Income and Corporation Taxes Act 1988.

Orders of the Day — 44. RELIEF FOR LOSSES ON CERTAIN UNLISTED SHARES

Resolved,

That provision may be made amending section 576 of the Income and Corporation Taxes Act 1988.

Orders of the Day — 45. GROUP RELIEF

Resolved,

That provision (including provision having retrospective effect) may be made about relief under Chapter IV of Part X of the Income and Corporation Taxes Act 1988.

Orders of the Day — 46. LIFE POLICIES ETC

Resolved,
That provision may be made in relation to policies of life insurance, contracts for life annuities and capital redemption policies.

Orders of the Day — 47. INSURANCE COMPANIES (PROVISIONAL REPAYMENTS)

Resolved,
That provision may be made in relation to Schedule 19AB to the Income and Corporation Taxes Act 1988.

Orders of the Day — 48. PENSION SCHEMES ETC

Resolved,
That provision (including provision having retrospective effect) may be made about—

(a) the approval of schemes for the purposes of Part XIV of the Income and Corporation Taxes Act 1988; and
(b) cases in which an approval for those purposes has been given or has ceased to have effect.

Orders of the Day — 49. FUTURES AND OPTIONS

Resolved,
That provision (including provision having retrospective effect) may be made amending Schedule 5AA to the Income and Corporation Taxes Act 1988.

Orders of the Day — 50. EXCHANGES OF SECURITIES ETC

Resolved,
That provision may be made—

(a) for sections 471 and 472 of the Income and Corporation Taxes Act 1988 to cease to have effect; and
(b) for section 473 of that Act to apply in relation to shares instead of securities.

Orders of the Day — 51. DOUBLE TAXATION RELIEF ON FOREIGN INTEREST AND DIVIDENDS

Resolved,
That provision may be made amending Chapter II of Part XVIII of the Income and Corporation Taxes Act 1988.

Orders of the Day — 52. NOTIFICATION OF ADJUSTMENT OF FOREIGN TAX

Resolved,

That—

(1) In section 806 of the Income and Corporation Taxes Act 1988, after subsection (2) there shall be inserted the following subsections—

"(3) Subject to subsection (5) below, where—

(a) any credit for foreign tax has been allowed to a person under any arrangements, and
(b) the amount of that credit is subsequently rendered excessive by reason of an adjustment of the amount of any tax payable under the laws of a territory outside the United Kingdom,

that person shall give notice in writing to an officer of the Board that an adjustment has been made that has rendered the amount of the credit excessive.

(4) A notice under subsection (3) above must be given within one year from the time of the making of the adjustment.

(5) Subsections (3) and (4) above do not apply where the adjustment is one the consequences of which in relation to the credit fall to be given effect to in accordance with regulations made under—

(a) section 182(1) of the Finance Act 1993 (regulations relating to individual members of Lloyd's); or
(b) section 229 of the Finance Act 1994 (regulations relating to corporate members of Lloyd's).

(6) A person who fails to comply with the requirements imposed on him by subsections (3) and (4) above in relation to any adjustment shall be liable to a penalty of an amount not exceeding the amount by which the credit allowed has been rendered excessive by reason of the adjustment."

(2) This Resolution has effect in relation to adjustments made on or after 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of the Provisional Collection of Taxes Act 1968.

Orders of the Day — 53. TRANSFER PRICING (NEW REGIME)

Resolved,
That provision for the purposes of income tax and corporation tax may be made, in place of sections 770 to 773 of the Income and Corporation Taxes Act 1988, in relation to cases where provision is made or imposed as between any two persons which would not have been made as between independent enterprises.

Orders of the Day — 54. EXCHANGE GAINS AND LOSSES AND FINANCIAL INSTRUMENTS

Resolved,
That provision may be made about the application in relation to any transaction of sections 135, 136, 136A and 137 of the Finance Act 1993 and section 167 of the Finance Act 1994.

Orders of the Day — 55. CONTROLLED FOREIGN COMPANIES

Resolved,
That provision may be made in relation to controlled foreign companies.

Orders of the Day — 56. CORPORATION TAX (CHANGE OF OWNERSHIP)

Resolved,
That provision (including provision having retrospective effect) may be made for the payment of unpaid tax, by persons other than the company liable, in cases where there has been a change in the ownership of a company and corporation tax assessed on that company or an associated company remains unpaid.

Orders of the Day — 57. CORPORATION TAX SELF-ASSESSMENT, ETC

Resolved,
That provision may be made about corporation tax self-assessment and other matters relating to the management of that tax.

The references in this Resolution to corporation tax include any amount treated as if it were corporation tax.

Orders of the Day — 58. CHARGEABLE GAINS (RATE FOR TRUSTEES ETC)

Resolved,
That provision may be made about the rate of capital gains tax in respect of gains accruing to trustees and personal representatives.

Orders of the Day — 59. CHARGEABLE GAINS (INDEXATION AND TAPER RELIEF)

Resolved,
That provision may be made amending the Taxation of Chargeable Gains Act 1992—

(a) to restrict entitlement to indexation allowance; and
(b) for purposes connected with the introduction of taper relief, to restrict the availability of other reliefs.

Orders of the Day — 60. CHARGEABLE GAINS (POOLING AND IDENTIFICATION)

Resolved,
That provision may be made for the purposes of the Taxation of Chargeable Gains Act 1992—

(a) limiting the circumstances in which different assets are to be treated as parts of a single asset; and
(b) setting out new rules for the identification of assets disposed of.

Orders of the Day — 61. CHARGEABLE GAINS (STOCK DIVIDENDS)

Resolved,
That provision may be made for the purposes of the Taxation of Chargeable Gains Act 1992 about stock dividends.

Orders of the Day — 62. CHARGEABLE GAINS (NON-RESIDENTS)

Resolved,

That provision may be made for the purposes of capital gains tax in relation to individuals who, having ceased to be resident or ordinarily resident in the United Kingdom, again become so resident or ordinarily resident.

Orders of the Day — 63. CHARGEABLE GAINS (OFFSHORE SETTLEMENTS)

Resolved,
That provision (including provision having retrospective effect) may be made imposing charges under the Taxation of Chargeable Gains Act 1992 on the beneficiaries and settlors of settlements where there has been a time when the trustees of the settlement, or of a settlement from which property comprised in the settlement directly or indirectly derives—

(a) have not been resident or ordinarily resident in the United Kingdom, or
(b) have fallen for the purposes of any double taxation relief

arrangements to be regarded as resident in a territory outside the United Kingdom.

Orders of the Day — 64. CHARGEABLE GAINS (TRANSFERS WITHIN A GROUP ETC.)

Resolved,
That provision may be made, for the purposes of the taxation of chargeable gains, about—

(a) the persons who are companies for the purposes of sections 170 to 181 of the Taxation of Chargeable Gains Act 1992;
(b) transfers between companies within a group; and
(c) schemes of reconstruction or amalgamation involving the transfer of a business.

Orders of the Day — 65. CHARGEABLE GAINS (ABOLITION OF RELIEFS)

Resolved,

That provision may be made repealing Chapter IA of Part V and sections 254 and 255 of the Taxation of Chargeable Gains Act 1992.

Orders of the Day — 66. CHARGEABLE GAINS (PRE-ENTRY GAINS)

Resolved,
That provision may be made amending the Taxation of Chargeable Gains Act 1992 so as to restrict the amounts which, where a company has joined a group, may be set against chargeable gains accruing to the company before it joined the group.

Orders of the Day — 67. INHERITANCE TAX (PROPERTY OF HISTORIC INTEREST ETC)

Resolved,
That provision may be made about—

(a) the designation of property for the purposes of any exemption under the Inheritance Tax Act 1984 or for the purposes of section 258 of the Taxation of Chargeable Gains Act 1992;

(b) the undertakings given for any of those purposes or for the purposes of any exemption under the Finance Act 1976 or the Finance Act 1975; and
(c) the conditions for exemption under section 27 of the Inheritance Tax Act 1984.

Orders of the Day — 68. INHERITANCE TAX (GIFTS FOR PUBLIC BENEFIT)

Resolved,
That provision may be made repealing section 26 of the Inheritance Tax Act 1984.

Orders of the Day — 69. INSURANCE PREMIUM TAX

Resolved,
That provision may be made for the purposes of insurance premium tax—

(a) in relation to premiums taxable at the higher rate; and
(b) in relation to taxable intermediaries.

Orders of the Day — 70. LANDFILL TAX

Resolved,
That provision may be made applying section 1 of the Collection of Taxes Act 1968 to landfill tax.

Orders of the Day — 71. STAMP DUTY (CONVEYANCES AND TRANSFERS ON SALE)

Resolved,
That the following provisions shall have effect for the period beginning 24th March 1998 and ending 31 days after the earliest of the dates mentioned in section 50(2) of the Finance Act 1973—

(1) Section 55 of the Finance Act 1963 and section 4 of the Finance Act (Northern Ireland) 1963 shall each be amended in accordance with the provisions of paragraphs (2) and (3) below.

(2) In subsection (l)(d), for "£1.50p" there shall be substituted "£2".

(3) In subsection (l)(e), for "£2" there shall be substituted "£3".

(4) This Resolution shall apply to instruments executed on or after 24th March 1998, except where the instrument in question is executed in pursuance of a contract made on or before 17th March 1998.

And it is hereby declared that it is expedient in the public interest that this Resolution should have statutory effect under the provisions of section 50 of the Finance Act 1973.

Orders of the Day — 72. GAS VALUATION

Resolved,
That provision (including provision having retrospective effect) may be made amending paragraph 3A of Schedule 3 to the Oil Taxation Act 1975, paragraph 12 of Schedule 2 to the Oil Taxation Act 1983 and section 493 of the Income and Corporation Taxes Act 1988.

Orders of the Day — 73. EUROPEAN SINGLE CURRENCY

Resolved,
That provision may be made for the modification, in connection with the adoption of a single currency by other member States of the European Community, of enactments and subordinate legislation relating to matters under the care and management of the Commissioners of Inland Revenue.

Orders of the Day — 74. RELIEF FROM TAX (INCIDENTAL AND CONSEQUENTIAL CHARGES)

Resolved,
That it is expedient to authorise any incidental or consequential charges to any duty or tax (including charges having retrospective effect) which may arise from provisions designed in general to afford relief from taxation.

Orders of the Day — PROCEDURE (FUTURE TAXATION)

Resolved,
That, notwithstanding anything to the contrary in the practice of the House relating to the matters which may be included in Finance Bills, any Finance Bill of the present Session may contain the following provisions taking effect in a future year—

(a) provision modifying the effect of sections 256, 257C and 347B of the Income and Corporation Taxes Act 1988;
(b) provision for charging corporation tax for the financial year 1999 and with respect to the rates of that tax for that year and the fraction mentioned in section 13(2) of the Income and Corporation Taxes Act 1988;
(c) provision for and in connection with the abolition of advance corporation tax;
(d) provision for the repeal of sections 26 and 27 of the Income and Corporation Taxes Act 1988;
(e) provision as to the computation of profits and losses for tax purposes;
(f) provision for reducing, in the case of cars capable of running on road fuel gas, the cash equivalents of the benefits chargeable to tax under section 157 of the Income and Corporation Taxes Act 1988;
(g) provision preventing the opening of tax-exempt special savings accounts after 5th April 1999;
(h) provision relating to tax credits;
(i) provision relating to the taxation of payments representative of dividends and other distributions of companies;
(j) provision about the attribution of gains to the settlors of settlements created before 19th March 1991;
(k) provision phasing out retirement relief under sections 163 and 164 of, and Schedule 6 to, the Taxation of Chargeable Gains Act 1992.

Orders of the Day — FINANCE (No. 2) BILL [MONEY]

Queen's recommendation having been signified—

Resolved,
That, for the purposes of any Act of the present Session relating to finance, it is expedient to authorise—

(a) the payment out of money provided by Parliament of sums payable by the Secretary of State by virtue of provisions of that Act relating to vehicle excise and registration;
(b) the making out of the Consolidated Fund of repayments of gas levy and of payments of interest on such repayments;
(c) any increase attributable to any provision of that Act relating to the Debt Management Account in the sums payable out of money provided by Parliament;
(d) any increase attributable to any provision of that Act relating to that Account in the sums payable out of or into the National Loans Fund or the Consolidated Fund;
(e) payments out of or into that Account.

Bill ordered to be brought in upon the foregoing resolutions: And that the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Secretary Prescott, Mr. Secretary Straw, Mr. Secretary Blunkett, Secretary Margaret Beckett, Mr. Secretary Dobson, Secretary Harriet Harman, Mr. Alistair Darling, Mr. Geoffrey Robinson, Mrs. Helen Liddell and Dawn Primarolo do prepare and bring it in.

Orders of the Day — FINANCE (NO. 2) BILL

Dawn Primarolo accordingly presented a Bill to grant certain duties, to alter other duties, and to amend the law relating to the National Debt and the Public Revenue,

and to make further provision in connection with Finance: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed [Bill 156].

PETITIONS

Green Belt (Development)

Mrs. Marion Roe: This petition of 170 signatures—[Interruption.]

Madam Speaker: Order. hon. Members who are leaving the Chamber should do so quietly. A lady is on her feet trying to present a petition.

Mrs. Roe: Thank you, Madam Speaker.
This petition, with 170 signatures, is from the residents of Northaw and Cuffley and surrounding areas in my constituency in Hertfordshire, and is entitled "Save our Countryside". It reads:
The petition of the residents of Cuffley and Northaw declares that we are concerned about the decisions to sanction plans for new development throughout the countryside.
My constituents have been appalled by the decision of the Labour Secretary of State for the Environment, Transport and the Regions not to intervene in the Liberal Democrat and Labour-controlled Hertfordshire county council's structure plan proposals to build 10,000 houses on green-belt land to the west of Stevenage near my constituency. That area of green belt will be destroyed by that major housing development in spite of the Government's claims before the general election to be committed to protecting the environment. The whole point of green-belt land is that it is not an elastic idea.
The petition continues:
The petitioners therefore request that the House of Commons urge the Secretary of State for the Environment, Transport and the Regions to ensure that more homes are built in city areas instead of the countryside or green belt, to breathe new life into our cities and to protect valuable countryside for future generations.
The petition has my whole-hearted support.

To lie upon the Table.

Disabled People (Benefits)

Dr. Brian Iddon: I want to present a petition on behalf of 342 people of Bolton who have either suffered long-term mental illness or who are friends or relatives of such a person, which seeks to protect their welfare benefits. It reads:
The petitioners therefore request that the House of Commons
1) Seek clarification from Government as to the plans that are being proposed and ask the Government to recognise the levels of concern and anxiety that the proposals have caused to people.
2) Urges the Secretary of State for Social Security to look for alternative ways of addressing the costs of the welfare state in preference to victimising the most vulnerable members of our society.

To lie upon the Table.

Local Government (Experimental Arrangements)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Allen.]

Dr. Phyllis Starkey: When I first applied for this debate, it was to be a celebration of the start of the passage through the House of the Local Government (Experimental Arrangements) Bill, which has been promoted in the other place by Lord Hunt and in this House by my hon. Friend the Member for Southampton, Test (Dr. Whitehead). However, I understand that that Bill was opposed on Friday by the Conservative Whips, so this debate is more in the nature of a lament for opportunities denied, or at least delayed.
Local government in the United Kingdom, unlike that in most European countries, has no separate or independent constitutional position. The powers, functions and financing of local authorities can be altered by statute, and the Crown in Parliament could abolish them altogether.
Under the previous Government, it sometimes appeared to those of us who were then in local government that abolition was the ultimate agenda. The previous Government increasingly controlled the finances, both capital and revenue, of local councils, stripped away their ability to provide affordable housing and, through compulsory competitive tendering, tried to end the role of councils as direct service providers.
Under the previous Government, there was an increasing number of areas in which local government was simply made an agent of central Government. The expansion of the quango state removed whole functions from local government. In spite of all that, local government—predominantly, although not exclusively, Labour local government—began to reinvent and modernise local democracy.
The key features of most progressive Labour councils were their commitment to quality services, to working in partnership with the private and voluntary sectors, and to making democracy in their localities more participative. They concentrated on making public services high-quality and user-friendly. For example, York council pioneered the citizens charter, which was taken over by the previous Government. Councils also pioneered customer guarantees and tenant consultation and user panels and, instead of the paternalistic provision of monolithic services for people, developed the provision of flexible services with the people.
Councils pioneered partnership, developing a facilitating role with the other players in community governance. They increasingly saw themselves not only as service providers but as facilitators and advocates for local communities, using their democratic legitimacy to take a leadership role. They also pioneered a variety of forms of more participative democracy, using citizens' juries and representative panels of citizens such as the Kirklees talkback scheme, neighbourhood forums with delegated budgets and tenant management co-operatives.
The council in Milton Keynes runs a health forum that brings together local NHS providers, the council and the voluntary sector to plan health services. The council
consulted young people in Milton Keynes before the unitary council came into effect, to ensure that it provided the services that young people wanted and identified a need for. It set up a benchmark survey of more than 1,000 local residents, backed up by citizens' panels, to consult on its budget priorities. It also set up a scrutiny committee, chaired by the main opposition group on the council, the Liberal Democrats.
Since the general election, the atmosphere has become distinctly more promising for local government. Unlike their predecessor, the new Labour Government are committed to renewing local democracy. There have been important symbols and signs of the new approach. The Government signed the European charter of local self-government, which recognises the independent democratic legitimacy of local government. They have brought into being a central-local concordat which recognises that central and local government are mutually dependent and sets out meetings at least twice a year between the Deputy Prime Minister, Cabinet and other Ministers, and leading members of the Local Government Association. The Government are committed to giving local authorities new powers to promote the economic, social and environmental well-being of their communities.
Lord Hunt's Bill was part of the new approach. It would have allowed councils to experiment with more effective forms of internal decision making, enabling them to give much greater clarity of direction to their programmes while retaining proper accountability to the local electorate. It was permissive, not prescriptive, and would have allowed councils to experiment in the way appropriate to them by developing cabinet-style government, decision making by lead members, or an elected mayor. I leave my hon. Friend the Member for Southampton, Test to talk in more detail about the events of Friday's Second Reading.
Many councils have already started to develop improved internal arrangements of the sort that would be permitted by the Hunt Bill. Several London boroughs have well-developed plans, including Hammersmith and Fulham, Barnet and Islington, as have several metropolitan boroughs and unitary councils such as Bradford, Kirklees, Southampton and Leicester.
Milton Keynes unitary council was also hoping to exploit the opportunity of the Bill in two particular ways. Milton Keynes is a city with a young population. The council had attempted to set up an innovative departmental structure that split children's from adult social services and then brought together all services relating to children. Children's social services, education, leisure, and arts and museums were to be brought into the same structure, to deliver proper, comprehensive services to meet the needs of children and young people. Unfortunately, the current rules for social services committees demand complex management arrangements that add nothing to service delivery.
The second way in which Milton Keynes council had hoped to use the opportunities of the Hunt Bill was to introduce a cabinet system that would have simplified the complex committee structure set up by the unitary council, and allowed councillors to concentrate their time and resources on delivering services rather than on keeping the committee system going. I am sorry to have to say that some of these sensible measures are being opposed by some Liberal Democrat councillors. I am


particularly sorry because I know that, when the Bill was discussed in the Lords, it was supported by several Liberal Democrat—and, indeed, Conservative—peers.
I should like to quote from the speech of Baroness Maddock on 17 December. She said that she shared Lord Hunt's
desire to make local government much more accountable; much more accessible, particularly for constituents; and more attractive so that people will put themselves forward as councillors to serve their communities."—[Official Report, House of Lords, 17 December 1997; Vol. 584, c. 693.]
Some peers expressed concerns about the need for effective scrutiny of the new proposals, but those concerns were addressed in amendments before the Bill completed its stages in the Lords. I hope that those Liberal Democrats in the Lords and in the Local Government Association who support the Bill will use their power to persuade their colleagues on Milton Keynes council to stop opposing the Labour administration's attempts to modernise and simplify local democracy.
I hope that my hon. Friend the Minister will join me in regretting the steps taken on Friday to delay the Local Government (Experimental Arrangements) Bill. As I understand it, those steps will prevent the Bill from progressing to Committee stage, where genuine concerns that Opposition Members might have about the detail of the Bill could have been addressed. It would be helpful to all those progressive forces in local government that wish to bring local decision making into the 21st century if the Minister could say what steps the Government are proposing to introduce the sort of changes outlined in Lord Hunt's Bill, so that the proposed experiments can go ahead.

Dr. Alan Whitehead: I should like to add my support to the case made by my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey). I was delighted to be able to pick up the Local Government (Experimental Arrangements) Bill when it came to this House from another place. It went through that other place with all-party support; indeed, several concerns expressed earlier in the Bill's passage were alleviated on Report, when all parties participated in drafting amendments to ensure that the Bill reached this House in a form that commanded a wide range of support, and that was genuinely innovative in terms of local government.
The Bill is permissive, as my hon. Friend said. No local authority is forced to undertake the measures contained in the Bill, yet it allows local authorities, if they wish, to experiment with different—

Mr. Deputy Speaker (Mr. Michael J. Martin): Order. It may be helpful to the hon. Gentleman if I tell him that he cannot speak in detail about a Bill that is going before either this House or the other place. He can speak about the topic, but not about the Bill in detail.

Dr. Whitehead: Thank you, Mr. Deputy Speaker. I shall try to make my remarks more general.
The Bill was significant because local government has historically thrived on local innovation, not only because local is best in many areas of policy, but because good

practice is best spread by example and local government needs to learn by its own experience, not by experiences imposed on it by others.
The problem of local government over the past 20 years is that central Government have all too often reacted to the problems that are sometimes thrown up by local government practice by exercising their prerogative to second-guess what local government is doing and by passing legislation, often in minute detail, to prescribe what local government can and cannot do. That has led to an atmosphere and a feeling prevalent in local government that it is always second-guessed and subject to decrees from above, and that its energies, innovation and experience are all too often ignored.
We must resolve not to do that again: it is bad for local government, and bad for democracy as a whole. If people believe that voting in local government is a waste of time, it is hardly surprising if their cynicism spreads to national politics.
I welcomed the recent comments of the Leader of the Opposition when he spoke to Conservative local councillors at Kensington town hall. I did not agree with everything he had to say, but I detected a welcome change of heart. He said that he considered local government to be important and that what it had to say was relevant for local and national purposes. He declared, on behalf of his party, a new beginning in the relationship between the centre and the local in the realm of local government.
For all these reasons, I was dismayed when my private Member's Bill last Friday was objected to by a Conservative Whip. Local government of all party persuasions wants that Bill on the statute book. It wants the freedom to do the things suggested in the Bill, and it wants to make a new start of the type that the Leader of the Opposition suggested at Kensington town hall was on offer. This House, regardless of party, should not deny local government that opportunity.
I have set the date of 24 April for another attempt at a Second Reading for the Bill. That provides a month for mature reflection. I hope that the Government tonight will give the assurances that the Opposition need to allow the Bill to proceed. I also hope that the Opposition will prove big enough to allow the Bill to go into Committee, where we can discuss the details that need discussion, to ensure that the Bill gives local government the opportunities it deserves.

The Minister for Local Government and Housing (Ms Hilary Armstrong): I congratulate my hon. Friend the Member for Milton Keynes, South-West (Dr. Starkey) on securing the debate, and my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on supporting her.
This evening marks a rather remarkable event. It is some time since the House, in an Adjournment debate, has considered innovation and the future shape of local government, and whether central Government should allow experimentation in that area. It is also some time since so many Members attended an Adjournment debate on such an issue. That signals the importance of the subject to Members of this Parliament, an unprecedented number of whom served in local government before coming here. That experience drives them to recognise that central Government have, for far too long, tried to shackle local government and not allow it to develop in response to the aims and ambitions of local people.
The Government are now pushing forward their agenda to enable local government to change its relationship with central Government, and with local people. For far too long, local government has had to look to central Government for its legitimacy, its opportunities to act, and approval for what it can spend money on.
This Government came to power on a manifesto making it abundantly clear that we are committed to democratic renewal in local government. That is why we recently published a consultation paper on local democracy and community leadership, as part of modernising local government. It is why we have been keen to encourage councils to begin to plan for change in a structured way that emerges from the all-party discussions of the past five or six years. Those discussions were reflected in the Bill that recently passed through the other place.
However, we do so not because we believe that it would be good for our party, but because we believe that it is healthy for democracy and better for local government, and therefore, in the long-term, better for government as a whole. The more we have a revived and a living democracy at local level, the more people become involved and interested in what government is up to at other levels, which is very healthy.
The issue of experimental arrangements for democratic renewal in local government has always been a cross-party one; I urge that it should not now become a partisan issue. We have been pleased, therefore, that cross-party initiatives have guided the way in which the topic has been handled.
In July 1993, a report of the working party on the internal management of local authorities in England, entitled "Community Leadership and Representation: Unlocking the Potential", said:
the Secretary of State for the Environment should take powers to allow, in consultation with local government, experimental changes to their internal management arrangements proposed by individual local authorities; legislation would allow approval of experiments subject to suitable safeguards.
That working party existed during the previous Parliament and under the auspices of the previous Administration.
Following the working party's report, a Select Committee on Relations Between Central and Local Government was established in the other place, and in July 1996 it published its report, "Rebuilding Trust". The all-party Select Committee in the other place took the view that
local authorities need to be allowed to experiment on the lines of the Scandinavian free commune system. This would include the freedom to experiment with ideas such as elected mayors and local referenda and new approaches to the provision of services and other responsibilities.
In November 1996, the previous Administration responded to the report, and welcomed that part of it. They welcomed the Committee's examination of the subject, identifying the report as an important contribution to the debate about the nature of local government in Britain.
The Government's response at that time was:
on freedom to experiment with internal structure and voting arrangements, the Government accepts the general principle of the Committee's recommendation that local authorities should be able to experiment with internal working arrangements.

In other words, the idea that we are discussing tonight was specifically welcomed by the previous Administration, and I know that they were committed to finding time in the House to introduce legislation.
As you can see, Mr. Deputy Speaker, this topic, which led to the introduction of a Bill in the other place, has developed in a cross-party way over several years, so the Government were keen to support progress on the topic.
It is not unusual for topics such as this to be introduced by the private Member's Bill route. For example, the Local Government (Access to Information) Act 1985 was introduced as a private Member's Bill by a Conservative Member, Mr. Robin Squire, who was then a Back Bencher. No Government time was provided for the Bill. The Government did, however, support it in the way that the present Government have supported the developments in the other place.
To demonstrate the degree to which we wish to support this initiative, we should be prepared to see much more cross-party involvement, not only in the development of the Bill but in its implementation, should it proceed through Parliament.
Therefore, I would first like to offer to have cross-party consultation on any guidance that legislation of this nature would produce, with all parties closely involved in its drafting in order to ensure maximum cross-party support. Throughout the preparation of any guidance that would attach to such legislation, we would wish to involve parties other than simply the Local Government Association, academics and so on.
For example, we shall invite the Select Committee on the Environment, Transport and Regional Affairs to provide input into the content of any guidance. We believe that that is the best and most appropriate way of involving Members of Parliament from all parties in the preparation of such a document. I propose that because I want any guidance to reflect all-party support for the legislation, which is imperative if we are to renew the political culture in local government. The House must approach the matter in a manner that is more mature than folk outside are used to seeing. We must consider what is in the best interests not of central Government but of local government.
Secondly, I propose to build in all-party participation when considering any submissions in which local authorities set out their plans for experimentation, which legislation of this sort would facilitate. It will be necessary to involve more than hon. Members in this place: it will be important to involve organisations such as the Local Government Association and the Audit Commission in consideration of such proposals. I shall invite the Select Committee to consider applications for inclusion under the provisions of any such legislation prior to a final decision being made by the Secretary of State for the Environment, Transport and the Regions.
I have written already to the Chairman of the Select Committee inviting the Committee to consider this role. It is interested, and will discuss the matter in early April. That is another important step in developing the principle of all-party involvement in any arrangements of this nature. I believe that the proposals allow for cross-party involvement not simply in the passage of legislation but in its implementation if such legislation were to become law.
I believe that this is an important issue, which the House must consider carefully. I understand that all parties are seeking to re-establish important relationships—as well as
establish new ones—with local government during this Parliament. They view those relationships much more as a partnership arrangement. The process began in 1992, with the review of local government initiated by the right hon. Member for Henley (Mr. Heseltine). That review was undertaken to replace the poll tax and to examine the internal, external and financial arrangements of local government.
I believe that it would be an opportunity missed if the House were to act in its own interests and say, "We shall not consider these issues any further." It would also be a great disappointment to the Local Government Association and to many local councils—including Conservative councils—that are keen to experiment with their internal democratic arrangements. That is why I am

bringing forward a unique package of cross-party involvement in legislation. Government have gone the extra mile. 1 strongly urge all hon. Members to do the same.
In the remaining few weeks, we can all become persuaders for experimentation in the way in which local authorities order their business to involve local people more effectively and to renew local democracy. I know that hon. Members from all parts of the House support the right of local councils to reform themselves and experiment with democratic innovation. I urge all those hon. Members to join us as persuaders to take the matter forward in the House, and to make sure that the House does not once again let local government down.

Question put and agreed to.

Adjourned accordingly at twenty-five minutes past Eleven o'clock.